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Ascott Residence Trust: Maintain HOLD

Summary: Ascott Residence Trust (ART) is in the midst of raising fresh equity to help refinance existing and new acquisitions. It expects to raise about S$199m via issuing 21% more new units. So far, the institutional and retail portions have been fully taken up. The only portion left is for existing unit-holders and the closing date is today, 20 Mar 06. We do not expect the demand for this tranche to be any less strong. Going forward, we expect ART?s asset size to reach S$1.2bn fairly soon. More importantly, with the new equity and the newly assigned credit rating, we estimate that ART could raise a further S$192m worth of debt and this will help it to continue with its growth via acquisition strategy. Finally, we have revised up our fair value estimate from S$1.82 to S$1.94 mainly from less dilution with cheaper cost of capital. However, at present trading range, we see limited upside potential. We thus maintain our HOLD rating on ART. (Winston Liew)