CapitaLand Ascott Trust Review @ 6 August 2023

Basic Profile & Key Statistics

• Main Sector(s): Hospitality 
• Country(s) with Assets: Australia, United States, Japan, England, Singapore, France, China, Vietnam, Philippines, Germany, Indonesia, Belgium, Spain, South Korea, Malaysia
• No. of Properties (exclude associate/fund): 107

Key Indicators

Performance Highlight

Revenue, gross profit, distribution and DPU improved YoY mainly due to higher revenue from existing properties and contributions from the acquisitions from 1H 2022 to 1H 2023.

Revenue per Available Unit

The portfolio RevPAU has recovered to 98% of pre-Covid level, with Australia, Japan, Singapore, UK

and USA performed above pre-Covid pro forma figures of the merger with Ascendas Hospitality Trust on 31 Dec 2019.

Acquisition

In 2Q 2023, CLAS completed the acquisition of Sagisu 5chome and Hakata Property (which is now known as Eslead Residence Osaka Fukushima East and Granfore Hakata Waterfront). Another acquisition in Fukoka is expected to be completed next year.

On 2 Aug, CLAS announced a proposed acquisition of 3 properties in London, Dublin and Jakarta. The acquisition would be financed through a combination of equity fundraising, debt and internal funds. Temple Bar Hotel will be undergoing renovation from 1Q 2024 to 4Q 2024, while The Cavendish London will be rebranded under The Crest Collection and the renovation would be carried out from 4Q 2024 to 4Q 2025.

Divestment

CLAS is divesting 4 properties in France with a slight net gain of EUR 0.2 million. The divestment is expected to be completed in 4Q 2023.

Development

The development of student accommodation in South Carolina is completed. The pre-leased occupancy is high at 87% and is ready to receive students in August 2023. As for the redevelopment of Somerset Liang Court Singapore, it is expected to be completed in 2H 2025.

Asset Enhancement Initiative

AEIs have been planned for multiple properties, schedule from 1Q this year to 2Q 2024.

Together with the proposed acquisition on 2 Aug, CLAS also announced for proposed AEIs for Novotel Sydney Central and Citadines Holborn-Covent Garden London. 

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 10% or more
• REIT Manager's Shareholding: Above median by 20% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Income in SGD/Major Currencies: Below median by 10% or more
• WALE: Above median by 20% or more
• Highest Lease Expiry within 5 Years: Above median by 20% or more; Falls in 2027 and beyond, without breakdown
• Weighted Average Land Lease Expiry: Above median by 20% or more

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing Ratio including Perps: ± 10% from median
• Cost of Debt: Below median by 20% or more
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: Below median by 20% or more
• WADM: Above median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 10% or more; Falls in 2027 and beyond, without breakdown
• Interest Coverage Ratio: ± 10% from median

Diversification Profile

• Top Geographical Contribution: Below median by 20% or more
• Top Property Contribution: Below median by 20% or more
• Top 5 Properties' Contribution: Below median by 20% or more
• Top Tenant Contribution: Below  median by 10% or more
• Top 10 Tenants' Contribution: Below median by 20% or more

Key Financial Metrics

• Property Yield: Below median by 10% or more
• Management Fees over Operating Distributable Income: Above median by 10% or more; $5.62 distribution for every dollar paid 
• Operating Distributable Income on Capital: Below median by 10% or more
• Operating Distributable Income Margin: Below median by 20% or more
• Operating Distribution Proportion: ± 5% from median

DPU Breakdown

• TTM DPU Breakdown:
• 88.7% from Operation
• 11.3% from Management Fees Paid in Units

Trends

• Uptrend: Operating Distributable Income Margin
• Slight Downtrend: NAV per Unit, Operating Distributable Income on Capital
• Downtrend: DPU from Operation, Interest Coverage Ratio, Property Yield

Relative Valuation

• Dividend Yield: Average for 1y & 5y; Above +1SD for 3y
• P/NAV:Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
High REIT Manager's Shareholding	Low REIT Sponsor's Shareholding
Long WALE	Low Directors of REIT Manager's Shareholding
Long Weighted Average Land Lease Expiry	High Perpetual Securities %
Low Cost of Debt	Low Unsecured Debt %
Long WADM	Low Property Yield
Low Top Geographical Contribution	Non Competitive Management Fees
Low Top Property & Top 5 Properties' Contributions	Low Operating Distributable Income on Capital
Low Top Tenant & Top 10 Tenants' Contributions	Low Operating Distributable Income Margin
Operating Distributable Income Margin Uptrend	DPU from Operation Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend

Compared to the previous half-yearly, despite only approximately 2% decline in gross revenue, the distributable income has declined by approx. 15% due to a combination of lower gross profit, high finance expenses and high tax expenses. Nonetheless, CLAS is expected to benefit from the completion of its student accommodation development in the U.S. and the anticipated recovery in international travel.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and detail of Singapore REIT

REIT Review - List of previous REIT review posts

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.