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Ascendas Hospitality Trust (A-HTrust) owns a portfolio of 11 hotels in Singapore, Japan, China, and Australia. As at 31 March 2017, the portfolio was valued at S$1.6 billion.
I previously attended A-HTrust’s 2016 AGM to find out more about the trust and its outlook on the hospitality sector. Last year, the Trust reported a drop in gross revenue and net property income due to currency losses and headwinds in the industry. The management had also just announced its partnership with Chinese hotel operator Huazhu Hotels Group to operate the trust’s Beijing hotels.
I attended this year’s AGM to find out how the Trust has fared over the past year and whether its partnership with Huazhu Hotels Group has worked out as planned. I got my answers and learned much more.
Here are nine things I learned from Ascendas Hospitality Trust 2017 AGM:
1. Gross revenue grew 4.3% year-on-year to S$224.4 million while net property income (NPI) grew 9.1% to S$99.2 million. The growth is mainly due to an overall improvement in portfolio performance and a stronger yen and Australian dollar this year. The large increase in NPI was driven mainly by the reopening and performance of Hotel Sunroute Osaka Namba in Japan.
2. Distributable income rose 5.5% year-on-year to S$63.9 million and distribution per security (DPS) rose 5.0% to 5.68 cents. The growth is even more impressive when you consider that the Trust included a one-off special distribution last year due to the divestment of their hotel in Cairns. If you exclude last year’s special distribution, the increase in distributable income and DPS is 9.1% and 8.4% respectively. Based on A-HTrusts’s last closing price of 83 cents (on 4 July 2017) and a DPS of 5.68 cents, the expected dividend yield is 6.8%.
3. Revenue per available room (RevPAR) in Australia increased 2.9% year-on-year to A$149. Likewise, RevPAR in China increased 2.7% to RMB343. RevPAR for Oakwood Apartments Ariake Tokyo remained flat. The rest of the properties are anchored by master leases from which the Trust earns rental income.
4. NPI from the Trust’s Beijing hotels increased 15.7% year-on-year to RMB38.6 million. This was driven by strong demand and Huazhu Hotels Group’s loyalty programme which has over 80 million members worldwide. A-HTrust CEO Tan Juay Hiang shared Chinese business travellers tend to use their smartphones to book hotel rooms online through the loyalty programme and this has helped increase occupancies especially at Ibis Beijing Sanyuan.
5. NPI from the Trust’s hotels in Japan increased 21.6% year-on-year to ¥2.0 billion. This was hugely driven by Hotel Sunroute Osaka which saw its NPI increase by 65.6%! The hotel reopened in April 2016 after a three-month ¥1.1 billion makeover. According to the CEO, a room night at the hotel was previously going for ¥6,000-6,500; it has since increased to ¥9,000-10,500. The value of Hotel Sunroute Osaka has now more than doubled from ¥8.9 billion to ¥18.3 billion.
6. NPI from Park Hotel Clarke Quay in Singapore, however, fell 9.2% year-on-year to S$13.3 million. The CEO explained that this was mainly due to new hotel supply even though tourist arrivals to Singapore have gone up. But he highlighted that Park Hotel Clarke Quay is under a master lease in which a portion of the annual rental income the Trust receives is fixed at S$11.5 million with an annual rental escalation of 3%.
7. Portfolio valuation grew 6.5% year-on-year to S$1.6 billion. Net asset value (NAV) per security increased 7.0% to 92 cents. Based on A-HTrust’s last closing price of 83 cents (on 4 July 2017), the Trust is trading around 9.8% below its NAV.
8. Gearing ratio is at 32.2% and 78.3% of total borrowings are at fixed interest rates. Cost of debt is at 2.9% and weighted average debt to maturity is 2.8 years which the CEO said was in line with industry practices.
9. A-HTrust has appointed ONYX Hospitality Group, a leading Asian hotel management company, as the operator for the Trust’s serviced apartments at Aurora Melbourne Central. The property is a mixed-used development comprising residences, serviced apartments, offices, and retail with direct access to Melbourne Central Railway Station. A-HTrust made a forward purchase of the serviced apartments component of the property for A$120.0 million in December 2015. The Trust has placed A$5.0 million deposit with the balance due when the property is completed in 2019.
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