Ascott Residence Trust’s (Ascott Reit) distribution per unit (DPU) for 3Q 2019 rose 5% to 1.91 cents compared with 3Q 2018. Unitholders’ distribution for 3Q 2019 grew 6% to S$41.6 million. It included a one-off partial distribution of a S$4.0 million gain from the divestment of Ascott Raffles Place Singapore in May 2019.
Gross profit for 3Q 2019 inched up 1% to S$65.0 million due to the adoption of FRS 116 Leases[1] with effect from 1 January 2019, partially offset by lower revenue due to the divestment of Ascott Raffles Place Singapore. In 3Q 2019, gross profit for Belgium and Spain increased by 29%[2] and 13%[2] respectively due to stronger leisure demand. Gross profit for Vietnam climbed 7%[2] because of higher demand from corporate travellers. United Kingdom also saw higher corporate and leisure demand, resulting in a 5%[2] increase in gross profit.
Ascott Reit maintains a balanced portfolio that provides stable and growth income. About 40% of the gross profit for 3Q 2019 was contributed by stable income from properties on master leases and properties on management contracts with minimum guaranteed income, while the remaining was from properties on management contracts. Ascott Reit’s diversified portfolio spans 14 countries, with approximately 60% in Asia Pacific as well as over 40% in Europe and the USA.
“Ascott Reit’s diversified portfolio has enabled us to deliver stable distributions to our unitholders. As part of our proactive portfolio management, we divested Ascott Raffles Place Singapore at 64% above book value in 2Q 2019 and as a result we could distribute part of the gain to unitholders in the third quarter. We also entered a transformational deal to combine Ascott Reit and Ascendas Hospitality Trust (A-HTRUST) that would cement the combined entity’s position as the largest hospitality trust in Asia Pacific, where business and leisure travel continues to be strong. We thank unitholders for their overwhelming support of the proposed combination and confidence in the future growth of Ascott Reit. We will continue with our disciplined investment and capital management to deliver stable income for our unitholders.”
– Mr Bob Tan, Ascott Residence Trust Management Limited’s (ARTML) Chairman
The proposed combination of Ascott Reit and A-HTRUST received strong approval of over 99% of the votes from unitholders at the respective Extraordinary General Meetings and Scheme meetings held on 21 October 2019. The combined entity, the world’s eighth largest with an asset value of S$7.6 billion[3], will continue to be named Ascott Residence Trust. Subject to relevant approvals, the proposed combination is expected to complete by the end of 2019 and the new Ascott Reit-Business Trust stapled units under the combined entity are expected to begin trading on the Singapore Exchange on 2 January 2020.
“With a debt headroom of about S$1.1 billion, we have the capacity to pursue yield-accretive acquisitions, development and conversion projects. Post-combination, we will continue to have the mandate to acquire lodging assets in any part of the world. Besides Asia Pacific, we will also keep a lookout for quality assets in Europe and the USA. lyf one-north Singapore, our maiden development project and coliving property, is on track to open in 2021. Post-completion of Ascott Reit’s combination with A-HTRUST, we will review the combined portfolio to assess opportunities for asset enhancements to maximise returns.”
– Ms Beh Siew Kim, ARTML’s Chief Executive Officer
Ascott Reit continues to adopt a prudent approach towards capital management, with 88% of its borrowings on fixed interest rates. Its gearing of 33% as at 30 September 2019 is well below the 45% gearing threshold set by the Monetary Authority of Singapore. Ascott Reit’s average cost of debt was 2.1% per annum.
Leveraging the low interest rate environment, Ascott Reit issued a new tranche of perpetual securities at a lower fixed rate of 3.88% per annum, which was used to fund the redemption of the existing S$150.0 million 5.00% perpetual securities at its first call date in October 2019. Ascott Reit’s ‘BBB’ investment grade rating, affirmed by Fitch Ratings in August 2019, allowed Ascott Reit to tap various funding sources, gave debt investors credit assurance and enabled Ascott Reit to raise funds on favourable terms.
International tourist arrivals grew 4% in the first half of 2019[4], with Asia Pacific recording a 6% increase[4]. For the rest of the year, growth in international tourist arrivals may moderate, on the back of ongoing trade tensions and soft economic indicators which are expected to weigh on business and consumer sentiment. On the supply front, the growth in new hotel room inventory is expected to outpace demand in some markets in the near term. The International Monetary Fund expects the global economy to grow 3.0% in 2019 and 3.4% in 2020[5]. For the second time this year, the US Federal Reserve has cut interest rates in September 2019 amid concerns about slowing global growth[6].
Summary of Results
3Q 2019 vs. 3Q 2018
| 3Q 2019 | 3Q 2018 | Change (%) | |
| Revenue (S$ million) (1) | 132.4 | 134.5 | (2) |
| Gross Profit (S$ million) (2) | 65.0 | 64.2 | 1 |
| Unitholders’ Distribution (S$ million) (3) | 41.6 | 39.4 | 6 |
| DPU (S cents) | 1.91 | 1.82 | 5 |
| DPU (S cents) (adjusted for one-off items) (5) | 1.73 | 1.72 | 1 |
| Revenue Per Available Unit
(RevPAU) S$/day |
155 | 158 | (2)
|
YTD Sep 2019 vs. YTD Sep 2018
| YTD Sep 2019 | YTD Sep 2018 | Change (%) | |
| Revenue (S$ million) (1) | 380.9 | 377.8 | 1 |
| Gross Profit (S$ million) (2) | 187.3 | 176.0 | 6 |
| Unitholders’ Distribution (S$ million) (4) | 116.2 | 108.3 | 7 |
| DPU (S cents) | 5.34 | 5.01 | 7 |
| DPU (S cents) (adjusted for one-off items) (5) | 4.76 | 4.66 | 2 |
| Revenue Per Available Unit
(RevPAU) S$/day |
149 | 147 | 1 |
(1) Revenue for 3Q 2019 was lower by S$2.1 million or 2% as compared to 3Q 2018 mainly due to the decrease in revenue of S$2.3 million from the divestment of Ascott Raffles Place Singapore.
Revenue for YTD Sep 2019 increased by S$3.1 million as compared to YTD Sep 2018. The increase in revenue was mainly due to higher revenue of S$4.2 million from the existing properties and additional contribution of S$2.2 million from the acquisition of Citadines Connect Sydney Airport, partially offset by the decrease in revenue of S$3.3 million from the divestment of Ascott Raffles Place Singapore.
(2) FRS 116 Leases is effective from 1 January 2019. The adoption of this standard changed the nature of expense for Ascott Reit’s portfolio of operating leases and replaced the straight-line operating lease expense to change in fair value for right-of-use assets and interest expense on lease liabilities. Gross profit (excluding FRS 116 impact) for 3Q 2019 and YTD Sep 2019 is S$59.9 million and S$171.9 million respectively.
(3) Unitholders’ distribution for 3Q 2019 included a one-off partial distribution of S$4.0 million gain from the divestment of Ascott Raffles Place Singapore.
(4) Unitholders’ distribution for YTD Sep 2019 included a realised exchange gain of S$5.7 million arising from the repayment of foreign currency bank loans with the proceeds from the divestment of Ascott Raffles Place Singapore, and the partial distribution of divestment gain of S$4.0 million.
Unitholders’ distribution for YTD Sep 2018 included a realised exchange gain of S$1.6 million arising from the receipt of divestment proceeds and repayment of foreign currency bank loans with the divestment proceeds.
(5) DPU for 3Q 2019 was adjusted to exclude the divestment gain (as mentioned above). DPU for 3Q 2018 was adjusted to exclude the contribution from Ascott Raffles Place Singapore.
DPU for YTD Sep 2019 was adjusted to exclude the divestment gain, realised exchange gain and contribution from Ascott Raffles Place Singapore. DPU for YTD Sep 2018 was adjusted to exclude the realised exchange gain and contribution from Ascott Raffles Place Singapore.
For Ascott Reit’s 3Q 2019 financial statement and presentation, please visit www.ascottreit.com.
.jpg){kind=tracking}