Ascendas Hospitality Trust fiscal 1Q net property income falls 9.3 percent on divestment, FX

Singapore five-dollar note Photo by Leslie Shaffer

Ascendas Hospitality Trust reported on Thursday that its fiscal first quarter net property income fell 9.3 percent on-year to S$20.2 million after the divestment of the two hotels in Beijing, a lower contribution from its Australia portfolio and as the Singapore dollar strengthened.

Gross revenue for the quarter ended 30 June fell 9.8 percent on-year to S$48.2 million, but income available for distribution rose 3.9 percent on-year in the period to S$16.4 million on the divestment proceeds and lower finance costs, it said in a filing to SGX after the market close on Thursday.

But the trust manager noted that the Australian dollar and Japanese yen were weaker against Singapore dollar.

The distribution per stapled security, or DPS, rose 3.1 percent on-year in the quarter to 1.35 Singapore cents, it said.

“The proceeds from the divestment was substantially used to pare down bank borrowings and fund the acquisition in Seoul,” it said in the statement, noting that some of the proceeds will be distributed to unitholders in the current fiscal year to mitigate the income decline due to the divestment.

“The divestment allowed us to realize substantial value and redeploy the capital into The Splaisir Seoul Dongdaemun, which is freehold and well positioned for value creation,” it said.

Australia contribution declines

The Australian hotels saw a decline in average daily room rates and occupancy during the quarter, the filing said.

“The hotels in Sydney experienced weakness in market conditions and contributed lower net property income with the exception of Courtyard by Marriott Sydney-North Ryde, which continued to improve following the major refurbishment in 2016,” it said. In its outlook, the trust manager said Sydney market conditions were expected to stay competitive.

“While demand is expected to remain healthy in the near term, increase in hotel rooms inventory in the city may moderate growth,” it said.

The Melbourne hotel was affected by a weaker conferences and events (C&E) business, but managed to secure an aircrew contract in the first quarter, it said.

“As Melbourne is faced with more supply of hotel rooms in the next 12 months and competes for C&E business with Sydney, the performance of the hotel market is expected to be moderate in the short term,” the outlook statement said.

The Brisbane hotel continued to face a “challenging market,” the filing said, but added that it also secured aircrew contracts during the period. “These aircrew contracts would provide a base load of demand for the hotels,” it said, but in the outlook statement, it noted that an “increasingly competitive environment” in Brisbane would pressure the hotel market.

But the trust remained optimistic on the market.

Singapore outlook

“While some of our Australia hotels currently experience challenges, we continue to be confident in the long term prospects of Australia in general, given the sound fundamentals of its hospitality market,” Tan Juay Hiang, CEO of the trust managers, said in the statement.

The trust manager said that Park Hotel Clarke Quay in Singapore continued to show growth, with its net property income rising 6.0 percent on-year in the quarter as the supply of new hotel rooms in the city-state began to ease.

It noted that inbound arrivals in Japan rose 15.6 percent on-year for the January-to-June period, which it expected to support the hotel markets in Tokyo and Osaka. But it added that Osaka’s recent earthquake and some adverse weather in parts of Japan may dampen some demand.

“On the supply front, stricter laws recently implemented on private home rentals are likely to lessen their adverse impact on the hotel market in Japan,” it said.

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