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Buy Call On Ascott REIT, Bargain Hunt On Starhill Global REIT
Tradeable, Tradeable Ideas | 26 March 2014
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By: Raymond Leung
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By: Nicholas Tan
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With the Straits Times Index on a fluctuating run, why not take a look at some of the REITs that are recently experiencing good catalysts that could bring you more value?

Oh, did I forget to mention good dividend yields too?

Ascott REIT: More Acquisitions To Come?
Late last year, Ascott Residence Trust (Ascott REIT) raised a total of $253.7 million through rights issue. Proceeds from the rights issue was used to pay a debt of $42.2 million while the balance was kept by the management for future acquisitions.

For the last two months, Ascott REIT started utilising the proceeds kept from the rights issue to acquire new properties.The two properties are located at Dalian, China and Fukuoka, Japan.

In February, the trust acquired its first serviced residence in Dalian for Rmb571 million. The property has an average occupancy rate of approximately 80 percent and is expected to have an EBITDA yield of 5.5 percent. Ascott REIT plans to refurbish the 195-unit property after the acquisition, which is expected to complete by mid-2014. The property will then be managed by The Ascott as Somerset Grand Central Dalian.

Last week, Ascott REIT announced the acquisition of the second property in Fukuoka, Japan. Ascott REIT will purchase the 389-unit property from The Ascott and ArcResidential Japan Investments. The property comes with a third-party master lease with an approximate tenure of 4.3 years remaining.

OCBC Investment expects the trust to announce the remaining acquisition by 1H14 with a total value of $153 million and EBITDA yield of 5.5 percent. Incorporating the two new properties, analysts from OCBC Investment expect the FY14 DPU to increase from $0.084 to $0.0858. OCBC Investment gave Ascott REIT a “Buy” call with a fair value of $1.33.

Starhill Global: Buy On Sale!
Last week, Starhill Global REIT announced the successful diversification of its Tokyo property, Holon L.The recent developments for the REIT attracted analysts to revaluate the trust.

Holon L is a three-storey building for retail use located in Tokyo, Japan. The building was sold by Starhill for a cash consideration of 1,026 million yen which is 6 percent higher than the valuation of the building at 968 million yen. Holon L is the second property in Japan to be sold by the trust after selling the Roppongi Primo property in February 2013.

The move by Starhill was due to the manager’s decision to reshuffle its portfolio and refocus as a Singapore-centric trust. Proceeds from will sale will likely be used to repay its yen debt while retaining the balance for working capital. Market watchers welcome the move as it will reduce the impact from yen’s devaluation.

Starhill management will be refocusing the trust in key markets such as Singapore, Malaysia and Australia. Therefore, we will likely see more divestment of other non-core assets such as the mall in Chengdu, China. Should there be other divestment in this financial year, Starhill might have to declare extra dividend to cover the gain in investments (for tax purposes).

Analysts from OCBC Investment gave Starhill a “Buy” call with an unchanged target price of $0.90 as the transaction is likely to have minimal impact in the earnings.

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This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

Boustead Singapore  0.785 -- --   
Business: A global infrastructure-related engineering services & geo-spatial technology firm. [FY18 Turnover] Real estate solutions (48.8%), geo-spatial technology (28.2%), energy-related engineering (23%).

Insight: Feb-19, 9M19 revenue surged 25% as contributions i... Read More
Ascott Residence Trust  1.310 +0.010 +0.77%   
Business: REIT invests in income-producing real estate assets which are used or predominantly used, as serviced residences, rental housing properties and other hospitality assets.

Insight: Apr-19, 1Q19 revenue increased 3% due to stronger ... Read More
Starhill Global REIT  0.775 +0.005 +0.65%   
Business: Invests primarily in real estate used for retail and office purposes. [FY18 Turnover] Wisma Atria (31.5%), Ngee Ann City (30.6%), Australia ppties (22.2%), M'sia ppties (13.4%), China/Japan ppties (2.3%).

Insight: Jan-19, 1H19 gross revenue fell 2.3% to $103.1m la... Read More


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