Ascott Raffles Place to boost ART's revenue contribution

It can inch up to 44%.

According to DBS Vickers, revenue and gross profit inched up 6% and 2% y-o-y respectively, to S$77.5m and S$40.8m. This was due to the acquisition of 2 Japanese properties (Citadines Shinjuku and Citadines Kyoto) over the past year offsetting the earnings vacuum from the divestments of Somerset Gordon Heights (Apr 12) and the closure of Somerset Grand Cairnhill at the end of Sep 12.

Here's more from DBS:

NPI margins dipped slightly to 52.7% due to increased operating costs in Singapore, Vietnam and Philippines but are expected to remain stable. As such, distributable income of S$25.6m (DPU of 2.24 Scts) grew by a narrower 1.4% y-o-y. YTD ART has delivered DPU of 6.74 Scts, which forms 78% of our full year forecasts.

Portfolio RevPAU boosted by various refurbishment exercises completed in the UK and China. ART achieved RevPAU of S$148/night in 3Q12, brought about by the stronger performance of its United Kingdom and China residences.

Its serviced residences in the UK (RevPAU + 9% y-o-y) benefited from improved take-ups to the rebranded Citadines Prestige Trafalgar Square, with a slight boost from the London Olympics held in July 12 which saw occupancy of close to 90% while China (RevPAU +15% y-o-y) saw improved demand post the refurbishment of Somerset Tianjin Olympic Tower from project and relocation business.

Performance to remain stable; ongoing asset enhancements to continue to underpin growth in 2013. Contribution from newly acquired Ascott Guangzhou and Ascott Raffles Place, where the latter’s fixed rent component is expected to increase ART’s revenue contribution from minimum income guarantees and master leases to 44% (vs 39% currently), is expected to improve earnings visibility for the trust going forward.

In addition, we continue to see growth prospects coming from proposed asset enhancement plans at various properties in Europe and Indonesia, which should contribute positively when completed progressively from 4Q13-1Q14.