MARKET PULSE: Ascott Residence Trust (6 Nov 2012)

Stock Name: AscottREIT
Company Name: ASCOTT RESIDENCE TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.37

MARKET PULSE: Ascott Residence Trust

6 Nov 2012

KEY IDEA Ascott Residence Trust: Portfolio exposed to growth regions We estimate that serviced residences (SRs) in Singapore account for approximately 9.6% of the Singapore lodging market (in terms of nights stayed), with hotels accounting for the rest. For the HK lodging market, we calculate that SRs have a 20% share and, according to The Apartment Service (TAS), SRs account for 30% of the Australian lodging market. Against both markets, we see the potential for more growth for Singapore SRs, particularly versus HK - a close hospitality peer. TAS also indicates that SRs make up 8% of the US lodging market, significantly higher than that of UK's (2%) and Europe's (1%). From these figures, we believe that the SR sector in Europe has significant potential for expansion. Through ART's properties in Europe and developing Asia, which respectively accounted for 38% and 25% of its portfolio by asset value as of 30 Sep, it has good exposure to what we believe will be the longer term growth regions for the global SR industry. We maintain our fair value of S$1.37 and BUY rating on ART. (Sarah Ong)

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NEWS HEADLINES - US stocks finished with modest gains, as investors remained cautious ahead of today's presidential election. The Dow rose 0.2% to 13,112.44, led by Hewlett-Packard and Caterpillar, while the S&P 500 Index gained 0.2% to end 1,417.26, supported by materials and energy stocks. The Nasdaq ended 0.6% higher at 2,999.66. - Singapore's manufacturing sector shrank for a fourth straight month in Oct as orders fell further, as the purchasing manager's index fell to 48.3 points from 48.7 points in Sep. - Thakral Corp's 3Q12 PATMI surged to S$12.8m, from S$2.9m a year ago, due to a S$15m gain on the sale of an Australian investment. Turnover declined 19% to S$74.8m, hurt by slowing demand for electronics. - Kingsmen Creatives' 3Q12 PATMI fell 21% YoY to S$3.5m, as revenue declined 18% to S$70.4m, due mainly to lower revenue at its interiors division. It expects 4Q12 to be a stronger quarter. - Hanwell Holdings reported a 3Q12 net loss of S$10.9m, reversing a profit of S$3.1m a year ago. Revenue fell 7% to S$92.8m, mainly due to a drop in turnover in its consumer business.