Monday, July 23, 2012

Future looks bright for Ascott Residence Trust

Ascott Residence Trust was started with the objective of investing in real estate and real estate assets which can produce income for the company over a period of time. It also uses these assets for providing services and renting housing properties. assets have increased three fold over the past few years to S$2.73 billion from the time it got listed in the year 2006. Its portfolio consists of 64 properties which are spread across 12 countries in Asia Pacific and Europe operating with different brand names. CapitaLand Limited one of the largest real estate player is the parent company whereas Ascott Residence Trust is an indirect Subsidiary company.

Future Prospects:

Recent developments at Ascott Residence Trust has been positive for the company after it reported positive numbers for the first quarter along with announcing that it would divest its stake in Somerset Grand Cairnhill to Capland for renovating it again as demand is increasing and its income would depend on REVPAU(Revenue per available room)  in coming years. Market in Singapore is expected to improve a lot by year 2017 which would prove to be a game changer for Ascott Residence Trust with the kind of assets  it has.

Divestment of Somerset Grand Cairnhill is expected to fetch S$359m which would result in a gain of S$87m for the company. Ascott Residence Trust announced that it would use the proceeds to acquire Ascott Raffles Place Singapore and Guangzhou for an estimated cost of S$220m & S$63m respectively.

Ascott Residence Trust is one of the leading companies whose earnings was upgraded by various analysts among 39 companies which have their presence in Singapore Financial Sector, Ascott Residence Trust earnings were upgraded by 99% for coming quarters considering the positive developments which are taking place in the company.

Why invest??

In the last one year the stock of Ascott Residence Trust has done considerably well compared to its peers in the same industry. Its stock price has jumped from S$0.93 to a high of S$1.24 making investors wealthier by 33%. 

We can expect the stock to do well in coming days with positive developments surrounding its divestment of Somerset Grand Cairnhill for an estimated price of S$359m along with its acquisition of Ascott Raffles Place Singapore and Guangzhou. Ascott Residence Trust has grown at a rate of 250% this year compared to an industry average of 16.60%. There is a huge variation between the company’s growth and industry average because of the kind of quality assets along with risk which Ascott Residence Trust takes compared to its peers.

OCBC has given an “Overweight” rating to the entire hospitality sector considering that there would be a surge in demand for hotel rooms at 6.4% per annum compared to 3.7% per annum estimated earlier. Based on all the above factors. they maintain a positive view on the stock and expect it to reach a Target price of S$1.30 in coming days before correcting.

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