Analysis of Ascendas Hospitality Trust - Takeover Target!!!

Ascendas Hospitality Trust says unnamed buyer interested in takeover - Channel NewsAsia

This is an exciting news for us as there will be a second REIT that is potentially going to be taken over. With talks are all early on, there is a chance that we can enter and participate in this take over bid. I am excited after benefitting from Saizen REIT's offer. Here is the statistics.

Current Price on 23th Dec 2015 = $0.73

• Yield = 7.56%  
• Price-to-book Ratio = 1.013
• Assets per unit = $1.282
• Debt per unit = $0.562 (including current liabilities)
• Gearing = 43.8%

Ascendas Hospitality Trust has a yield which is quite comparable to the others. At 7.56% yield, it is lower than OUE Hospitality Trust and Fraser Hospitality Trust. Moreover, their price-to-book ratio is currently at 1.013 which is the worst among all the hospitality trust. The rest are priced between 0.665 to 0.904. Gearing is at 43.8% which is still quite high.

With Ascendas Hospitality Trust being a target for take over, I am quite surprised especially with the current yield and NAV. The interested party would need to buy all units at a premium to their NAV in order to convince shareholders to sell to them and it would be a disadvantage to them. Yield might still be attractive enough though. There are others which are better i.e. OUE Hospitality Trust and Fraser Hospitality Trust. But I believe their sponsors won't be willing to let them go and wish to continue to have control over their hospitality operations.

It is seldom that I do prediction but I will make one here today. I am predicting that the take over price to be at $0.82. This price is arrived at a yield of 6.7% which is quite similar to the yield for CDL Hospitality Trust. The good thing is that there is a reference point from one of the anchor big shots in the sub-sector and for hospitality trust, CDL H-Trust is the one. Thus, with this prediction, I will be trying to enter tomorrow (Christmas Eve), looking at a potential profit of more than 10%.

I also believe this will propel the rest of the smaller REITs upwards as the consolidation of REITs starts to kick in in 2016. This is great news for investors in smaller REITs as we do stand to gain from it. Thus, price of smaller REITs, I believe, will at least stabilize.