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Why 3 More Properties Could Make Ascott REIT A Buy
Tradeable, Tradeable Ideas | 10 July 2014
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By: Raymond Leung
Articles (142) Profile
  1. Ascott REIT marks its foray into Malaysia with a RM175 million acquisition of Somerset Ampang Kuala Lumpur.
  2. Together with two other acquisitions, Ascott REIT will boast a portfolio worth about $4 billion, a 5.3 percent increase.
  3. The acquisitions are expected to increase Ascott REIT’s distribution per unit by 1.2 percent to $0.0881.

Analysts' updates on Ascott REIT

On Monday, Ascott REIT (Ascott) announced the acquisition of three properties located in Malaysia and China. This marks the foray of the REIT into Kuala Lumpur, Malaysia. The other two properties will be located in Wuhan and Xi’an, China respectively and will bring Ascott REIT’s Chinese portfolio to ten.

Source: Ascott REIT, Acquisition Summary

The three properties will be transacted at a total purchase consideration of $131.6 million and is expected to have an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) yield of 5.1 percent. On a pro forma basis for FY13, these properties will increase Ascott’s distribution per unit (DPU) by 1.2 percent from $0.0871 to $0.0881.

Source: Ascott REIT, Distribution Per Unit

After the acquisition, the total asset value of the trust will be increased by 5.3 percent to $4 billion. After the inclusion of the properties, Ascott REIT will boost its apartment portfolio to 9,985 from 9,278.

Source: Ascott REIT, Asset Increment

Source: Ascott REIT, Geographical Breakdown

Somerset Ampang Kuala Lumpur will be acquired from its sponsor, The Ascott Limited for RM175 million. The property consists of 207 apartment units comprising of studios, 1-bedroom, 2-bedroom and 3-bedroom units.

The property is believed to be purchased at par value as its independent valuers valued the properties at the purchase price.

Citadines Zhuankou Wuhan and Citadines Gaoxin Xi’an will be purchased at RMB 252 million and RMB 270 million respectively from Ascott Serviced Residences (China) Fund which the sponsor holds a 36.1 percent stake. The two properties have a total of 500 apartment units which consists of studio, 1-bedroom, and 2-bedroom units.

Both properties are sitting on leasehold lands which will expire in 2043 and 2056 respectively. It is believed that the Kuala Lumpur property is purchased for strategic purposes while the China properties are purchased for its future growth potential.

Currently, the occupancy rates of these properties stand at the 80 percent range. A possible upside may come in the future if the management is able to increase the occupancy rates.

In view of the acquisition of these properties, analysts from OCBC Research and DBS Vickers Research gave Ascott REIT a target price of $1.33.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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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

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