$$$ KPO and CZM $$$: Ascendas Hospitality Trust

Thursday, February 1, 2018

Ascendas Hospitality Trust

With the market running up so much and STI hitting a multi-year high, it has been harder and harder for us to buy stocks. Everything seems so expensive until today! Our latest buy - Ascendas Hospitality Trust 9000 units @ $0.895 :)

Ascendas Hospitality Trust Valuation and Properties

Let me give a quick introduction to Ascendas Hospitality Trust. It has 11 9 properties in 7 6 cities, 4 3 countries (Australia, China, Japan and Singapore) valued at $1.6 Billion. Based on the last quarter financial statement, its current NAV is was at $0.891 which translate to a PB of 1.01.

Ascendas Hospitality Trust Stock Fundamentals

However, on the 29th January 2018 (after market close), Ascendas Hospitality Trust announced that it will be divesting its China investment/properties at a premium of 101.5% above the Independent Valuation. You read that right.

This divestment meant that its NAV would shoot up. Note that the numbers are generated with the assumption that the divestment has taken place at 31st March 2017. The total number of shares/stapled security would have increased since then. Using the latest (2Q) financial statement, a more realistic NAV should be [1.02 - (0.92 - 0.891)] * 1,124,481 / 1,127,553 ~ $0.988 which translate to a PB of 0.905 (at a discount)! I am expecting it to trade closer to PB of 1 which is around $0.99.

Ascendas Hospitality Trust Net Property Income (NPI) by Geography

Looking at the annual report FY2016/2017, China contributed 8% of the Net Property Income (NPI). A conservative assumption is that the DPU (Dividend Per Unit) will be impacted by the same percentage, 5.68 * 0.92 ~ 5.22 which translate to a 5.8% dividend yield. This is on the low side but it certainly has room for improvement through yield accretive acquisitions because it has the cash/lower gearing going forward (~20+%).

I made all these calculations while I was on a bus traveling to work yesterday and decided to queue for it before market open. Blogging it down to see how wrong/right I am as its 3Q financial statement will be out today after trading hours.

On a side note, APAC Realty went up by 9% crazily (no announcement) yesterday to close at $1.08. At least I am right for this analysis and am sitting on a 25% profit (for now)!

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  1. Congrats on your return from APAC and Nice grab on AHT. Coincidentally, I was doing also doing some homework about AHT and the china property divestment.

    1. Hahaha. Haven sell yet so might disappear anytime too. Basket, DPU drop so much. NAV not reflected. I got it so wrong!

    2. Aiyo. You so humble.

      You can cash them out on Monday! If nothing goes wrong, value should not drop much :p hehehehe

      When I was doing some homework on AHT earlier on this divestment, something just caught my finger and it held me tight. Which prevented me from getting AHT as I felt that it is fairly valued and at this price, the yield is not sufficient to compensate me for the risk I’m exposed to this investment.

      I’ve been looking at AHT for the longest time since it’s hovering around the 74-75 region last year and it had been a headache to choose between FCOT and AHT back then.

      The hospitality sector is rather cyclical and is pretty much dependent on it’s RevPar rather than having a fixed duration contract by most other REITS sector like the industral or office. While the hospitality sector turns over, I believe that the RevPar will be impacted positively, bringing the dividends higher.

      Nonetheless, I believe APAC’s gain should easily help you out , not forgetting about the gains from your other big holdings. Sit back, shake your leg and get 5.8% while waiting is also very good!! :p

    3. Hahaha. Yeah. I will choose the easy way out, sit back and shake leg.