STI : 3,133.76
Price Target : 12-Month S$ 1.33 (prev. S$ 1.42)
•4Q13 results in line; NAV lifted by stable property valuations
•Awaiting the acquisition kicker
•Maintain BUY; S$1.33 TP (based on DCF metric) has been adjusted for rights issue
4Q13 results in line. Gross revenue and profit came in at S$83.9m (+11% y-o-y) and S$41.6m (+8% y-o-y), respectively. Topline growth was driven by contribution from an expanded portfolio which offset the income vacuum from divested properties. Portfolio RevPAU was 7% lower y-o-y at S$129/night. Distributable income grew 15% y-o-y to S$26.3m but DPU fell 34% due to an enlarged share base after the 1-for-5 rights issue.
NAV inches up to S$1.37/unit. The trust also booked S$74m revaluation gain mainly from Somerset Grand Fortune Garden, while valuations for its serviced residences were stable/firm or higher. These nudged up NAV to S$1.37/unit.
Continues to pursue acquisitions. Armed with a strong war chest and available debt headroom given low gearing of 34%, management will continue to pursue growth through acquisitions. They see opportunities within the region (China, Malaysia) and in Australia and Europe, likely to come from its sponsor Ascott Group. We have factored in acquisitions worth S$350m @ 6.0% yield in our forecasts, assuming a target post acquisition gearing of c.40%.
Maintain BUY, S$1.33 TP adjusted for rights issue. We believe the stock will re-rate when there are clear acquisition targets, and we expect management to deliver on that front soon. Our TP has been adjusted for the enlarged share base post-rights issue and acquisitions.
Publish date: 22/01/14