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ASCOTT Residence Trust has posted year-on-year declines in distributable income of 17 per cent for the second quarter and 20 per cent for H1. On a brighter note, the Q2 2009 figure was a 2 per cent improvement from the preceding quarter.
'As we enter into the second half of the year, there are initial signs of stabilisation in the markets in which we operate,' said Ascott Residence Trust Management Ltd CEO Chong Kee Hiong.
The group's operating performance in 2009 is expected to be profitable but lower than in 2008, ART said.
In Singapore, the group's worst-hit market, occupancy rates were in the high-60 per cent range in H1. Mr Chong is predicting the figure will rise to around 80 per cent in H2.
ART wrote down the value of its property portfolio by about $61 million from the end-December 2008 value to $1.53 billion as at June 30, 2009; but this has no impact on unitholders' distribution.
Unitholders will receive distribution per unit of 3.55 cents for H1 2009, down from 4.52 cents for H1 last year. The latest payout works out to an annualised distribution yield of 8.7 per cent based on ART's closing price on Wednesday of 82.5 cents. The counter ended 1.5 cents higher yesterday at 84 cents. ART's net asset value per unit slipped from $1.47 as at end-December 2008 to $1.36 as at end-June 2009.
Mr Chong said the $61 million revaluation deficit of serviced residence properties was due mainly to properties in China and Japan. The valuations were done using the discounted cash flow analysis method.
Q2 revenue slipped 7 per cent to $43 million. Gross profit fell 11 per cent to $20.8 million while distributable income slid 17 per cent to $11 million. The decline in operating performance was due mainly to weaker demand for service residences in Singapore and China, as a result of the global economic slowdown and increased competition from new supply in Beijing and Shanghai, partly offset by contribution from the properties acquired after Q2 2008.
For Singapore, gross profit fell 41 per cent to $3.2 million for Q2 2009. Revenue per available apartment unit (RevPAU) slipped 39 per cent to $154 per day. The decrease was due to weaker demand from business travellers, ART said. The trust has two properties here - Somerset Grand Cairnhill and Somerset Liang Court. The trust plans to renovate these ageing properties in phases.
The group has a capital expenditure budget of about $20 million-$30 million for 2009 and 2010 for its overall portfolio, which it will fund through existing facilities.
ART also has serviced residences in Australia, Japan, the Philippines, Indonesia and Vietnam.
ART's serviced residences in Australia achieved a 10.6 per cent rise in overall RevPAU in Australian dollar terms. However, this translated to a 10 per cent fall in Singapore dollar terms due to the depreciation of the A$.
The trust's business in Japan was affected by the H1N1 virus outbreak, especially in June. But rental housing properties continued to do well, resulting in gross profit from Japan rising 4 per cent to $2.8 million.
Gross profit in Vietnam rose 12 per cent to $6.5 million, due mainly to contribution from the recently acquired Somerset Westlake Lake as well as increases in office and shop rental incomes.
As at June 30, ART's gearing ratio was 40.7 per cent. Distributable income for H1 2009 fell 20 per cent to $21.9 million.
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