ART declared 1Q09 DPU of 1.77 cts. The annualised DPU of 7.1 cts represents a 19.5% decline yoy. Despite the drop, it was still ahead of the consensus, though it fell short of our estimate by 3%. Gross revenue declined 8% yoy to $42.1m as a result of a slowdown in demand for accommodation. Unitholders’ distribution in 1Q09 grew 5% qoq due to a one-off charge in 4Q08.

ART’s largest revenue contributors, the Singapore and China markets, registered steep declines in REVPAU in 1Q09, compared against a high base in 1Q08. Gross profits for the quarter declined 35% and 40% respectively under intense competition and the absence of the “Olympic-effect”. Occupancy rates at the Singapore serviced residences remained at around 80% while that in China have declined to 50-60% from 70% last year.

The underlying performances at some of the emerging markets such as Vietnam and Indonesia were stable. Revenue was also boosted by the appreciation of the USD against the SGD. Occupancy rates at the apartments in these markets are still healthy at around 80%. Vietnam, continues to be the best performer and its recently acquired Somerset Westlake in Hanoi will contribute to revenue from Apr-09.

Around $96m in bank loans is due in Dec-09 and discussions with banks to secure refinancing are already ongoing. The loan amount represents just 15% of ART’s total borrowings. Gearing is expected to remain at 38.7% in the absence of acquisitions and minimal capex requirements.

We have lowered our revenue estimates for the next two years by 6% based on lower REVPAU assumptions. Our revised DPU estimates still imply yields of 14.6% and 12.8%, for FY09F and FY10F. The long-stay segment, currently representing 39% of revenue, should provide support in FY09F. Our target price remains intact. Maintain BUY.