Ascendas Hospitality Trust,
A total wash out
Price Target : 12-Month S$ 0.80 (Prev S$ 1.00)
•1Q14 results significantly below forecasts
•Execution of growth strategy not going as well as expected; cut FY14/15F by 19%/15%
•HOLD, TP lowered to S$0.80
A perfect storm. Ascendas Hospitality Trust (A-HTRUST)’s 1Q14 revenue and net property income of S$48.0m and S$16.2m came in 11% and 7% below IPO forecast. This was attributed to the continued weakness in the operating environment in Australia and China, which led to RevPAR falling by 3.6% and 9.9% to AUD163/night and Rmb426/night, respectively. A better performance from Ariake Sunroute hotel mitigated the weak performance at its other hotels. In addition, the weak JPY and AUD against the SGD further impacted performance. As a result, distributable income was 12% y-o-y lower at S$10.9m, translating to a DPU of 1.29Scts.
Slow execution of growth strategy; slashing FY14/15F earnings by 19%/15%. The trust’s operating landscape remains challenging. We had previously assumed a 5-10% rise in RevPARs post refurbishment at its hotel portfolio in Australia. However, while response was good for the new rooms, the expected uplift in rates did not flow to earnings due to a weak operating climate in Australia. In addition, the Manager is only able to roll over existing corporate contracts at the end of the year and as a result, its hotels are likely to only see a meaningful uplift in room rates in 2014. Moreover, its China and Singapore hotels are also likely to perform below initial estimates. We have thus reduced our RevPAR assumptions (from +7% to -3%) in FY13 and have also reduced our AUD-S$ / JPY-S$ rates to current spot rates. As such, we have cut FY14/15F earnings by 19%/15%.
Maintain HOLD, TP cut to S$0.80. Our TP is adjusted to S$0.80 after taking into account our updated earnings forecast and a hike in risk free rate assumpions. Maintain HOLD.
Publish date: 12/08/13