Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST
DBS Vickers Securities in a Nov 28 research report says: "Ascott REIT has entered into a conditional sale and purchase agreement to acquire a 60% interest in 160-unit Citadines Shinjuku Tokyo from Mitsubishi Estate Co Ltd (MEC).
"Purchase consideration amounts to JPY 2.6 billion ($45.7 million), implying an initial yield of 4.5%yield. While this is lower compared against our estimated WACC of 7.3% for the REIT, as the acquisition will be fully funded by debt, it should be accretive to earnings. Post acquisition ART's gearing level is expected to head slightly upwards to 42% (vs 41% previously).
"While stock offers a relatively attractive yield of 8.6, there exists potential downside risk in the event of a worsening European crisis, given that 42% of its assets are in Europe. Our target price has been revised to $1.13. DOWNGRADE TO HOLD."
Company Name: ASCOTT RESIDENCE TRUST
| Research House: DBS Vickers | Price Call: HOLD | Target Price: 1.13 |
DBS Vickers Securities in a Nov 28 research report says: "Ascott REIT has entered into a conditional sale and purchase agreement to acquire a 60% interest in 160-unit Citadines Shinjuku Tokyo from Mitsubishi Estate Co Ltd (MEC).
"Purchase consideration amounts to JPY 2.6 billion ($45.7 million), implying an initial yield of 4.5%yield. While this is lower compared against our estimated WACC of 7.3% for the REIT, as the acquisition will be fully funded by debt, it should be accretive to earnings. Post acquisition ART's gearing level is expected to head slightly upwards to 42% (vs 41% previously).
"While stock offers a relatively attractive yield of 8.6, there exists potential downside risk in the event of a worsening European crisis, given that 42% of its assets are in Europe. Our target price has been revised to $1.13. DOWNGRADE TO HOLD."
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