Daiwa downgraded Ascott Residence Trust to Hold from Outperform, saying the unit price looks fairly valued after climbing so far this year.
“As one of the best year-to-date performers (unit price up 30 percent year-to-date) in the S-REIT sector and with DPU (distribution per unit) yields trading at post-GFC (global financial crisis) lows, we no longer see value in the stock,” Daiwa said in a note Wednesday.
Last week, Ascott Residence Trust reported its third quarter gross profit increased 1 percent on-year to S$65 million on changes to accounting for leases, partly offset by lower revenue. Revenue for the quarter ended 30 September fell 2 percent on-year to S$132.4 million, mainly on the divestment of Ascott Raffles Place Singapore, the trust said in a filing to SGX.
Daiwa said both gross profit and revenue missed its forecasts, by 8 percent and 4 percent, respectively, on weaker-than-expected U.S., China and Japan performances. But it added DPU was in line with the bank’s forecast due to distributing gains to make up for the income loss from divesting the Ascott Raffles Place Singapore property.
The investment bank raised its 2020-21 DPU forecast by 1 percent to 2 percent on lower funding costs, and the assumptionthe REIT will continue capital distributions of S$4 million a quarter from the Ascott Raffles Place Singapore divestment.
Daiwa increased its target price on Ascott Residence Trust to S$1.38 from S$1.34.
The units ended Friday down 0.72 percent at S$1.37.