STI : 3,192.90
Price Target : 12-Month S$ 1.42 (Prev S$ 1.36)
• Reaping value from the sale of 81 serviced residence units in Beijing
• Proceeds to be redeployed to other value enhancing sources
• BUY, S$1.42 TP as we roll forward valuations
Proposed sale of 81 units at Somerset Grand Fortune Garden to reap significant value. Ascott REIT is considering the strata sale of its stake in 81 units at Somerset Grand Fortune Garden Beijing for an estimated consideration of up to Rmb 628m (S$128.1m). The property comprises 221 units, out of which 81 units are owned by the REIT. The selling price represents c.2.6x of its latest recorded book value (S$48.2m) and implies an exit yield of c1.6%. Ascott REIT will reap a potential gain of up to S$79.9m upon completion.
Proceeds to be channeled to other value enhancing sources. While China remains a key growth market for the REIT, this proposed sale is unique to the property. It is understood that a 3rd party owner is also selling 100 units in the property, after which, given the fragmented ownership, we believe it will be less operationally efficient to manage. Proceeds from this sale can be utilised more efficiently either through debt repayment or into other income producing and valueaccretive acquisitions that become available to the Manager. Pro-forma impact on DPU and NAV is estimated to be c.0.1 Scts and 3 Scts respectively.
Maintain BUY, TP S$1.42. We have kept our estimates the same pending the completion of the sale. TP revised to S$1.42 as we roll forward our valuation. TP of S$1.42 offers a total return of c17%. Maintain BUY
Publish date: 21/10/13