SG Young Investment: Ascendas Hospitality Trust


SG Young Investment: Ascendas Hospitality Trust

Share prices of varied stocks attended down significantly before few weeks which include Ascendas Hospitality Trust (AHT). It has been one of my favorite hospitality trust investment which I bought back in 2014. It has been a 4 years investment now. AHT made some significant advancements before 1 year which they have summarised in their recent AGM last fri. I wanted to make a trip down but was too occupied at work therefore i couldn’t devote some time off because of this AGM. Nevertheless, I got the slides presented through the AGM which gives quite good information on the advancements within the last 1 year.

0.80 presents a good opportunity to choose hospitality trust with steady dividend yield of more than 7%. Let’s discuss in detail on why is this so. AHT has 10 hotels located in Australia, Japan, Korea and Singapore. Earlier this year, AHT did divest away their 2 Beijing hotels at higher valuation. It had been the chat of the city as its talk about price shot up because investors thought that its Net Asset Value is much higher than what they have devote their balance sheet. However, this was short lived when its Australia properties didn’t do as well and what managed to get worse was Australia hotels collectively composed the biggest contribution to its DPU.

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  • Investment tools common in SG market (ETFs, REITs, bonds, Singapore savings bonds)

Its Australia online property income declined -6.4% in FY2017/18 when compared with FY2016/17. Its other hotels in Singapore and China do relatively well and Japan ‘s hotel was unchanged with a slight decrease. Overall, DPU increased 3.2% due mainly to savings in financing cost and look charge received in connection to the divestment of Beijing hotels.

One thing to notice is that I could see REVPAR is increasing for everyone its hotels in every countries including Australia. That is an encouraging indication. Its Australia’s hotel in Sydney still performed well. One of its Sydney’s hotel was also going through renovation which means this affected DPU in the past 1 year. Moving forward, DPU should continue being good as the renovation has already been done. AHT’s gearing reaches 30.8% which is a decrease from the prior 32.2% after it divested its Beijing hotels.

One significant thing to note is that its effective interest came down to 2.7% from the previous 3.1%. That is an important factor in this increasing interest environment which I wrote in another article here. 0.79 is trading at a discount. For its debts profile, 77.2% is on set rate while 22.8% is on floating rate. Most of its debts are in AUD and JPY which isn’t that affected by interest rate movement so far. Japan still has one of the lowest interest rates in the global world currently.

After its divestment of its Beijing hotels, AHT continues to pursue growth opportunities by acquiring DPU accretive hotels. It made its maiden admittance into Seoul, South Korea by acquiring a hotel that is located in the prominent Dongdaemun area strategically. The acquisition is DPS accretive by 1.7% on pro forma FY2017/18 basis.