As mentioned in the previous reports, recent acquisitions (CCSA) and divestments (Ascott RP) has cause ART to temporarily deviate from their targeted 50/50 growth/stable revenue structure. ART has expressed that future acquisitions will aim to restore the 50/50 balance (the proposed ART-AHT merger will also help to rebalance the structure).
ART is paying 5% coupon on $150mn perpetual securities that are callable in October 2019. Given the favourable interest rate environment, we believe ART will call the perpetual and reap saving on new perps issued. ART has another $250mn tranche of perps with a coupon of 4.68% will be callable in June 2020.
Maintain ACCUMULATE with an unchanged target price of $1.36
We reiterate our ACCUMULATE on ART due to geographical diversification, upside exposure from management contracts (“growth” revenue) and ability to acquire accretively due to S$1.1bn debt headroom and low cost of funding (2.3%). This translates to a dividend yield of 5.4% and a FY19e P/NAV of 0.96x.