Ascott 1Q13 misses expectations

Realised exchange gain of S$8.1m
Ascott Residence Trust (ART) reported a 3% YoY decrease in revenue to S$69.2m for 1Q13. Gross profit fell 9% YoY to S$33.8m. However, unitholders’ distribution increased by 14% YoY to S$27.6m. Unitholders’ distribution included S$8.1m from the replacement of foreign currency bank loans using proceeds from the S$150m placement in Feb. Without this one-off item, unitholders’ distribution would have fallen by 19% YoY and we judge the results to be lower than ours and the street’s expectations. 1Q13 DPU increased 5% YoY to 2.25 S cents, forming 25% of ours and the street's FY13F expectations.

SG RevPAU dips 11% YoY
Revenue fell because there was a reduction of S$3.1m in contributions from existing properties, chiefly from Singapore, Vietnam and Japan (due to a depreciation of JPY against SGD). A partial counteracting factor was a S$0.7m increase in revenue from the net effect of acquisitions less divestments. RevPAU fell 10% YoY to S$124, weighed by the performance of Singapore and the Philippines. In Singapore, 1Q13 RevPAU decreased by 11% YoY on a same store basis to S$193, driven by lower occupancy as a result of disruption from the construction of MRT tunnel for the new downtown line near Somerset Liang Court, poorer demand from project groups, and higher non-refundable GST.

Maintain HOLD
We are cutting our FY13F DPU estimate to 8.1 S cents from 8.7 S cents. Our fair value for ART declines from S$1.36 to S$1.35 and we maintain our HOLD rating. With the equity placement in Feb, ART lowered its gearing to 36% as of 31 Mar. We expect that the REIT will continue to be active with acquisitions this year and if substantial enough, such acquisitions could serve as positive price catalysts.