by winston » Tue Dec 15, 2009 12:41 pm
This type of reports looks only at the upside and forget about looking at the risks. In this case, it's Swine Flu ...
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Not vested. From Kim Eng:-
1) Ascott REIT – Company Update (Anni Kum, DID: 6432 1470)
Previous Day Closing price: $1.14
Recommendation: Buy (maintained)
Target price: $1.29 (maintained)
MICE could resurrect room rates
Marina Bay Sands have signed up events for its Sands Expo and Convention Centre that will attract more attendees than its 2500-room hotel can accommodate. Tourist arrivals to Singapore in October have continued its uptrend while occupancy was at 83%. An increase in occupancy rates would help to lift unit-rates for ART’s properties in Singapore.
Shanghai expo could boost demand for lodging
The sponsor, Ascott Group, has 25 properties across 12 cities in China, including six that will open by 2011. In 2009 alone, four properties were opened in China, outlining the Group’s confidence in the Chinese market. Corporate spend and travel should improve in 2010 as Shanghai welcomes 70m visitors at World Expo 2010, which could benefit ART’s property in the city.
Forecasts below pre-crisis level – room for upside
The REVPAUs in ART’s key markets (Singapore, Vietnam, and China), as of 3Q09, are 15-44% below their peak a year ago. Our current forecasts reflect an average REVPAU growth of only 7% in 2010. Assuming that REVPAU in Singapore recovers to pre-crisis levels, FY10F DPU estimate could increase from 7.8 cts to 8.1 cts, offering a decent yield of 7.1%.
Potential equity-raising could be minimally dilutive
At 41.5%, ART’s gearing is the highest among the S-REITs, spurring the possibility of an equity issue. Recent private placements by Mapletree Logistics and Suntec REIT were done at discounts to trading prices of only 5.6-6.5%, which were minimally dilutive. Hence, ART could tap the equity market via placements in 2010 to fund its acquisitions or AEIs.
Valuations still attractive; Reiterate Buy
At 0.86x P/NAV, ART offers cheap and excellent exposure to premium hospitality assets at prime locations in fast-growing cities in Asia compared to CDLHT, which trades at 1.2x P/NAV. Management expects minimal downward revaluations of its properties. We reiterate our Buy, based on a total return of 21% from our target price of $1.29.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"