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Ascendas Hospitality Trust should do well.

Sunday, June 18, 2017

A reader saw my blog on Ascendas H-Trust earlier this year and, after doing some research, decided to invest in the Trust for income. He shared the following with me:

1. 52% of net property income is derived from Australia and this proportion could rise because of the boom in tourism. Number of international flight routes have increased with more Chinese tourist arrivals.

2. 25% of net property income is derived from Japan and tourism has been on the rise in Japan as well. The Japanese government's drive to almost double the number of visitors to 40 million by 2020 is going to give a continued boost to the hospitality sector.

3. The Trust has a gearing level of 33%. Backed by a strong sponsor and having natural forex hedge with its debt largely denominated in local currencies are positives.

4. Through Park Hotel, the Trust derives only 15% of its net property income from Singapore. So, the slowdown in the Singapore hospitality sector is less of a concern for the Trust compared to CDL H-Trust and FEHT which have much larger exposure to the market here. The fact that Park Hotel is master leased provides greater income visibility too.

5. Assets owned by the Trust are mostly freehold and do not suffer from lease decay which is another plus when compared to CDL H-Trust and FEHT.

Good stuff.

I will end this blog by saying that I got into the Trust at lower prices and I am investing for income. Not too concerned with the fluctuation in unit price.

As long as the trust continues to do well enough to pay me an income that makes sense, I am happy.

Related post:
More income from Ascendas H-Trust.
See my Japan travel photos: HERE.


AK71 said...

The managers of Ascendas Hospitality Trust (A-HTRUST) are selling two hotel properties, Beijing Novotel Sanyuan and Ibis Beijing Sanyuan, for a total of RMB1.156 billion ($235.9 million) in cash.

Beijing Novotel Sanyuan is a mid-scale, 17-storey hotel located in the Chaoyang District of Beijing, China. It offers 306 guest rooms.

Ibis Beijing Sanyuan is a 14-storey economy hotel with 397 guest rooms, and is located adjacent to Novotel Beijing Sanyuan.
Following the sale of the Beijing hotels, A-HTRUST will no longer have any properties in China.

In a Monday announcement, A-HTRUST’s managers say the purchase price represents a premium of 101.5% to the Beijing hotels’ latest combined valuation of RMB574 million as at end-Oct 2017, as well as a premium of 178% to their initial purchase price when they were acquired for listing in 2012.

The managers say their divestment of the two hotels is in line with the trust’s active asset management strategy.

The net proceeds from the sales will be substantially used for the repayment of existing loans, asset enhancement opportunities, future acquisitions and working capital, they add.

A-HTRUST’s managers also intend to distribute a portion of the net proceeds to stapled security holders following completion of the divestment, which is expected to take place in the first half of FY18/19.

According to Tan Juay Hiang, CEO of the managers, the purchase price of RMB1.156 billion translates to a net property income (NPI) yield of 3.3% and hence makes a compelling offer that creates substantial value for the trust’s stapled security holders.

On this note, DBS Vickers Securities maintains its "buy" call on A-HTRUST with a target price of 91 cents pending the release of the trust's 3Q18 results on 1 Feb.

In a Tuesday report, DBS lead analyst Mervyn Song says he expects a positive market reaction to the announcement, given that pro-forma net asset value (NAV) per unit is expected to rise $1.02 from 89 cents as at end Sept-2017.

"We believe this transaction will give confidence over A-HTRUST's property valuations, espsecially given the market's scepticism over A-HTRUST's book value resulting in A-HTRUST historically trading below 1 times price-to-book," states Song.


AK71 said...

Reader says...
AHT may be divested?! Jialat

AK says...
I hope not but it is not in our control.
Oh well. Might or might not happen.
This is not the first time there is talk of this.

seefei said...

Capland may divest AHT to lower gearing.

AK71 said...

Hi seefei,

Unfortunately, yes, it might happen. :(

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