Ascendas Hospitality Trust AGM 2018

Most of the milestones for Ascendas Hospitality Trust(AHT) during the presentation had been addressed in my previous posts.Some notable tidbits from the presentations by the CEO:

• Financial cost effective interest rate drop to 2.7%, interesting since interest rate is increasing.
• DPU increase 3.2% (from that one time look fee)
• Retained earnings is 7% in FY16/17 vs 5% in FY 15/16
• 156 Million Debt paid from the divestment of
• China Properties at >100% gain which has a short lease while Japan & Seoul properties are freehold.
• To diversify portfolio to near 20% geographically
• Interested to diversify into Seoul (I think More M&A Still Possible)
• Seoul hotel operator to be replace by Sunroute ( The one operating in Japan) 

I was wondering how AHT will manage the debt with so many M&A. Since they are buying up Osaka properties in a stagger method, they are able pay up their 156 Million debt expiring this year and pick up more loan when the time to take over the property is near. 

AGM Q&A by unitholders and the board:

Q: Whether the newly acquired Osaka hotels were earthquake proof buildings and whether they were insured against earthquakes.

A: I heard the CEO answered 'yes', not sure if it is in regard to the insurance bit. The hotel is earthquake compliance.It is not customary in Japan to buy an earthquake insurance.

Q: Digital DNA/Strategy. Get rid of the CDs, but do something but not emails/downloads.... (My internal OS: "the!?", asking the impossible? or spend more $?)

A: Management states that depend on the hotel operators. As a property manager, the trust leases out the property for the operator to manage the hotel, is up to the operator to carry out its functions to what they think is best. They cannot influence them. It will be better for them to leverage on the sponsor's on this rather than find their own digital strategy.

Q: On data protection

A: The trust understands the concerns on personal data protection, especially the recent strict regulation set by the EU. It will strive to remind the hotel operator on the seriousness every now and then.

Q: Whether any of the divestment gain from the sale of the China hotels has been disbursed.

A: No. The proceeds will be used to cover the absents of the China properties until the Osaka properties are ready.

Q: Given the compressed yields, how will the trust source out good properties for acquisition and whether they will be funded by rights issue. (I'm lumping some questions together)

A: It is hard to source for good properties and they are not readily available. It is because of the rich experience of the board and management that they were able to gain access to some information that normal property agent won't be able to get. The divestment of the China hotels and the subsequent acquisitions are examples of those. The sale of the China hotels was described as opportunistic and it is unlikely to happen again. As to the method of funding future acquisitions, it will be made known to unitholders if there ever is one that requires an EGM to approve any rights issuance.

Q: What is the board view of Airbnb?

A: Airbnb is here to stay but they are for different segment, leisure. Whereas hotels are targeting the business segments. Hotels have the facilities to hold meetings and conferences. However, countries have show sign of tighten the regulation for Airbnb such as japan.

Q: What is the difference between Master Lease(ML) and Management Contract(MC) ? What is the 7% retained earnings used for?

A: ML take on all the risk of their operations, AHT just rent to them the properties. While a MC is the opposite of ML, AHT take on the operation risk of the hotels, hence they need retained earnings to manage them. AHT try to balance a 50-50 between ML & MC. ML brings stability as they get fix rent from the ML but MC can have a both upside and downside depending on the Hotel's performance.

Some of the info on the Q&A was provided by @inspirez, user of InvestingNote..