Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,114.16 -11.98 -0.38%
Hang Seng 26,719.58 -128.91 -0.48%
Dow Jones 26,770.20 -255.68 -0.95%
Shanghai Composite 2,938.14 -39.19 -1.32%
Ascendas Hospitality Trust Loses Appeal Despite Upcoming International Events
Tradeable, Tradeable Ideas | 18 June 2014
Related stocks:
By: Lim Si Jie
Articles (169) Profile
  1. A-HTrust continues to register stable revenue income from its properties but remains susceptible to foreign exchange movements.
  2. DPS fell 14.2 percent to 1.21 cents in Q4 FY 2014.
  3. Upcoming international events will boost demand in the tourism and hospitality market except in China.

Mixed Q4 Results

Source: Ascendas HTrust Financial Report

Ascendas Hospitality Trust (A-HTRUST) posted a 9.7 percent year on year growth in gross revenue to $52.9 million for Q4 ending 31st March 2014. Net property income rose 19.3 percent to $22 million.

Income growth was attributed to Park Hotel Clarke Quay which was acquired in June 2013. However, the year on year performance was affected by foreign exchange movement in the Australian Dollar and Japanese Yen.

Income available for distribution in Q4 declined 7.5 percent to $12.5 million. This was largely due to the $2 million cost incurred for partially unwinding cross currency swaps for the Australia portfolio. DPS for Q4 dropped 28 percent to 1.21 cents. This is 14.2 percent lower than the adjusted DPS of 1.41 cents in the previous year.

Portfolio performance

Source: Ascendas HTrust Financial Report

The average occupancy for A-HTRUST’s Australia hotels climbed 3.1 percentage points y-o-y in Q4 FY2013/14 to 83.8 percent and the average daily rate (ADR) rose 7.4 percent y-o-y to AUD174. As such, the revenue per available room (RevPAR) increased 11.5 percent for the quarter. For the full year, the average occupancy remained high at 81 percent, ADR increased 3.7 percent to AUD168 and RevPAR increased by 4.6 percent to AUD136.

In China, hotel revenue growth was affected by China’s slowing growth and the government’s austerity measures. Against this backdrop, the ADR of the two Beijing hotels dropped by 3.7 percent y-o-y to Rmb393 in Q4 FY2013/14 but the average occupancy increased by 3.6 percentage points y-o-y to 72.5 percent. Overall, RevPAR increased marginally by 1.4 percent y-o-y to Rmb285. For the full year, the average occupancy rate rose 4.3 percentage points to 80.3 percent while ADR declined 4.8 percent to RMB 401, and RevPAR increased slightly to Rmb322.

The hotels in Singapore and Japan continue to provide A-HTRUST with a stable stream of rental income due to their largely fixed rent structures.

During the quarter, A-HTRUST secured a new $60 million three-year revolving credit facility. All refinancing have been completed and no more debt is due for refinancing until 2016.

The outlook for Australia’s accommodation market is expected to benefit from the rebounding domestic corporate sentiment and large-scale events in 2014 such as the Rotary Convention in June and the G20 Summit in November. Stable revenue growth in Australia portfolio is expected for FY2014/15.

In China, moderate growth is expected due to the government’s austerity drive and intensified competition from a higher supply of hotel rooms. As the midscale and economy hotel segments are expected to see more demand than the upscale and luxury segments, occupancy rates in the two Beijing hotels should remain stable. Corporate demand in Beijing is likely to remain strong in view of the pipeline of Meetings, Incentives, Conventions and Exhibitions (MICE) in 2014, including the Asia-Pacific Economic Cooperation (APEC) and PT/Expo Comm China.

Recovery of the Japanese economy and depreciation of Japanese yen continue to drive strong demand in hotel occupancy. The latest acquisition of Osaka Namba Washington Hotel Plaza will enlarge and stabilise portfolio’s income stream for FY2014/15.

Source: Ascendas HTrust Financial Report

The tourism and hospitality sector in Singapore is still poised to grow with the upcoming tourist attractions and a busy year of large-scale corporate and sporting events such as the CommunicAsia 2014 in June, Formula One Grand Prix in September and Women’s Tennis Association Championships in October.

Foreign Currency Translation
The global financial markets are expected to remain volatile. Cognisant of a possible further weakening of the AUD, A-HTrust managers have been unwinding the AUD/SGD cross-currency swaps progressively since Q3 FY2013/14. Such unwinding is expected to incur costs. However, it will strengthen A-HTRUST’s balance sheet against the volatility of currency movements.

Bearish. Stable With Limited Upside
Ascendas Hospitality Trust will provide investors with a stable passive income. However, investors might as well aim for better returns by parking their money into another trust with a higher return and higher probability of capital gain.

Join us and get fresh and free content delivered to you automatically each week!

We hate spam too! Your information is safe with us!

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Ascendas Hospitality Trust  1.130 -- --   
Business: A stapled group comprising Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust.

Insight: May-19, FY19 revenue fell 6.3% to $190.5m while NP... Read More

Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.