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Wednesday, June 27, 2018

Ascendas Hospitality Trust

Ascendasas Hospitality Trust (“A-HTRUST”) has on 15 June 2018, via Ascendas Hospitality Real Estate Investment Trust, agreed to acquire a portfolio of three hotels in Osaka, Japan for JPY10,290.0 million (S$126.1 million) (the “Acquisition”). The acquisition of the three hotels, Hotel WBF Kitasemba West, Hotel WBF Kitasemba East and Hotel WBF Honmachi (collectively the “Hotels”), will deepen A-HTRUST’s presence in Osaka, the third largest city in Japan with a population of 2.7 million



 1 . The aggregate purchase consideration represents a 2.9% discount to the latest valuation of the Hotels of JPY10,600.0 million. The Acquisition will be fully funded by debt and is expected to be accretive to distribution per stapled security (“DPS”). On a pro forma basis, the DPS for FY2017/18 would have increased by 4.3% to 6.11 cents



 2 . The acquisitions of Hotel WBF Kitasemba West and Hotel WBF Kitasemba East are expected to be completed by September 2018, while the acquisition of Hotel WBF Honmachi is expected to be completed by January 2019.

Another fantastic acquisition by this trust that is dpu accreditation.



Current price of 77.5 cents yield will be 7.89% if dpu is going to rise to 6.11 cenrs.

Current price is trading below it's fair value ..

Not a call to buy or sell.

A-HTrust : from TA point of view, it is looking rather bearish!
After hitting the high of 90.5 cents on 1st Feb 2018, it has since retreated sharply and continue to go on a down hill to touch the current low price of 78.5 cents.




The price is hovering below most of the SMA lines such as 20,50,100 & 200 days MA.Doesn't look rosy as it has broken down again the recent low of 79 cents.

Short term wise, I think it may likely go down to test 73.5 cents with extension to 70 cents.



Not a call to buy or sell.
Pls do you own due diligence.

Looking through the Financial results for past few years, the Total Revenue seems to be generally increasing from 214.28m (2013) to 224.43m in 2017.

Net income is not consistence as in 2013 it was generating  16.68m and has been drifted lower to 8.10m in 2017.You may want to look further into the detail for this declining net income figure.

Gearing looks fine which is below 35%.

Cash flow has also been generally declining .

Average dividend of 5.48 cents.
Yield is about 6.5%

NAV of 85.6 cents.

I have roughly workout the fair value using DDM and derive the value of about 87 cents.

Trade/Invest base on your own decision.

Quote : Jeremyowtaip -

1. Recent sale of China hotel properties at good premium to unlock value for unitholders.
2. NAV per share after divestment of China properties is increased thus leading to an attractive P/B ratio below 1.



3. Some possible ways the trust may utilise the divestment proceeds include paying higher distributions or a one-off special distribution seen as a return of capital to unitholders. Also, the trust may utilise the proceeds to pare down debts and decrease gearing. The trust may also utilise the proceeds for AEIs of existing properties and/or for new acquisitions. Or can channel the proceeds into all of the above mentioned with different weightings for each depending on the manager.
My take is that no matter which ways the divestment proceeds are utilised, the manager should provide a sound basis to their unitholders why it chooses certain way to use the proceeds.
For example, if it chooses to do a new acquisition that is not so attractive as compared to previous China hotel properties it has divested paying too high a price for the new property which has less attractiveness. Then, we ask ourselves this question. Why exit the China hotel properties at a premium only to re-enter another new property with less attractive future prospects? This would be doing one good decision followed by one bad decision to negate the previous good effect.
If it chooses to pare down strategically some of the existing debts to increase the average weighted length of time to debt expiry in view of potential rise in interest rates. Maybe this is a good decision.
If it chooses to reward unitholders with higher one-off distributions, it is a neutral option depending how they do it. If most of the proceeds are used towards rewarding unitholders, it may help to boost their unit price higher on a short term basis when a higher distribution attracts investors to this trust. But when the buffett has already ended, what comes after next? Any more growth? If not, then it is just a short term fever with no longer term positive effects of increasing distribution on a one-off basis.
Do not get me wrong. I am not saying rewarding unitholders is always wrong. But overdoing it just to boost up the unit price on a shorter term basis may not be as optimal compared to growing the trust on a long term basis providing sustainable increase in distributions over time. Unitholders will be happy only for a short while with a buffett treat as compared to a trust or REIT which really can sustain their growth in distributable income for a very long time to come giving out better and better treats (which may not be buffett standard but still relatively good standard treats).
In conclusion, AHT has done an impressive job with the divestment of the China hotel properties at good premium gains. Let's see how they use the divestment proceeds. I believe this is more important to watch for than the ongoing price movements of this trust. Of course, if the trust proves it can use the proceeds in a very good and sound way, then buying it at the current price now is good. If otherwise, even if one can supposedly get it cheap at less than P/B ratio of 1, think again is it really a great wonderful catch.
Dyodd

Ascendas Hospitality Trust (“A-HTRUST”) was listed in July 2012 as a stapled group comprising Ascendas Hospitality Real Estate Investment Trust (“A-HREIT”) and Ascendas Hospitality Business Trust (“A-HBT”), established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-producing real estate used predominantly for hospitality purposes, as well as real estate related assets in connection with the foregoing. The asset portfolio comprises 11 quality hotels with over 4,000 rooms geographically diversified across key cities in Australia, China, Japan and Singapore; and located close proximity to central business districts, business precincts, suburban centres, transportation nodes and iconic tourist landmarks. A-HTRUST is managed by Ascendas Hospitality Fund Management Pte. Ltd., the manager of A-HREIT, and Ascendas Hospitality Trust Management Pte. Ltd., the trustee-manager of A-HBT. A-HTRUST is sponsored by Ascendas Land International Pte Ltd, a wholly-owned subsidiary of Ascendas Pte Ltd.

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