CapitaLand Ascott Trust (CLAS) announced on Jan 27 its results for FY2024 and 2HFY2024 ended Dec 31, 2024, which saw headline distribution per stapled security falling 7% y-o-y to 6.1 cents and 3.55 cents respectively.
However, CLAS’ core DPS for 2HFY2024 rose 3% y-o-y to 3.08 cents and core DPS for FY2024 rose by 1% y-o-y to 5.49 cents.
The lower headline numbers were due to realised exchange gains in FY2023, arising from the settlement of cross-currency interest rate swaps and repayment of foreign currency bank loans and medium-term notes.
According to CLAS’ statement, stronger operating performance, acquisitions and completed AEIs mitigated the impact of divestments, ongoing AEIs, higher financing costs and depreciation of most foreign currencies against the Singapore dollar.
Although gross profit rose by 10% y-o-y in FY2024 to $370.9 million and by 8% y-o-y in 2H2024 to $198 million, total distribution fell by 2% y-o-y $231.2 million in FY2024 and by 4% y-o-y in 2HFY2024 to $134.8 million. Revenue per available unit (RevPAU) for 2HFY2024 grew 6% to $167, compared to 2H2023; RevPAU for 4QFY2024 went up by 9% y-o-y to $176 above pre-pandemic levels.
See more: CapitaLand Ascott Trust's core FY2024 DPS rises 3% y-o-y but headline DPS falls 7% y-o-y
See also: CGSI raises TP on ISDN Holdings to 40 cents on expected gradual recovery
Following the results announcement, analysts have kept a rather positive stance on CLAS.
Citi has kept its “buy” call and $1.12 target price on CLAS, as analyst Brandon Lee likes the trust’s valuations of 0.8 times P/B and >7% yields, as well as its proactive portfolio reconstitution strategy.
Lee sees that the 2HFY2024 results illustrated a continued improvement in core operating performance, evidenced by core DPU and same-store gross profit up by a respective 3% and 4% y-o-y, with 4QFY2024 RevPAU (+9% y-o-y) continuing to outperform pre-Covid level.
See also: DBS is RHB’s top pick with dividend yield ‘too good to ignore’
CLAS’ share price has also trended in line with S-REITs ytd, gaining about 1%. Portfolio valuation also inched up about 1% y-o-y to $8.8 billion, largely helped by stronger operating performance and discount rates’ compression amid stable cap rates.
“Outlook in majority of its markets for 1Q2025 is healthy, including Japan (driven by strong international demand), France (with bookings already ahead of 1Q2024, helped by events), US (driven by major events, longer holiday weekends and limited supply in New York) and UK (driven by bookings from transient/group segments),” says Lee, who remains cautious that demand in Singapore and Australia in 1Q2025 is expected to be softer y-o-y.
PhillipCapital is also maintaining its “buy” call with a slightly higher target price of $1.05 from $1.04 previously. CLAS remains to be the research house’s top pick in the sector, supported by its mix of stable and growth income sources and geographical diversification, which enhance resilience amid global uncertainties.
Analyst Darren Chan says: “We expect mid-single-digit portfolio RevPAU growth in FY2025, driven by improving occupancy, with overseas assets offsetting softer demand in Singapore due to the absence of major concerts.”
CLAS still holds over $300 million in previous divestment gains on its balance sheet, some of which will be utilised in FY2025 to offset the absence of contributions from assets that will be undergoing AEIs. The current share price implies an FY2025 dividend yield of 7%.
On the outlook, CLAS remains focused on portfolio reconstitution, divesting mature assets, and reinvesting proceeds to enhance shareholder returns. Its geographical diversification is expected to help mitigate softening demand in the Singapore market, with overseas markets such as Japan providing strength.
Acquisition opportunities are being explored in key markets, particularly in hotels and serviced residences (SR) in Europe and Japan, which offers positive yield spreads. In Japan, longer-stay rental housing in cities like Tokyo, Osaka, and Fukuoka also presents an opportunity due to the low cost of debt.
For more stories about where money flows, click here for Capital Section
OCBC Investment Research on the other hand has a “buy” recommendation too with a lower target price of 99 cents from $1.06 previously.
CLAS’ portfolio recorded a gross fair value gain of about $72 million on stronger operating performance and compression in discount rates, representing 1% surplus over net book value in FY2024. Capitalisation rates remained largely stable expect in the US, where there was some expansion.
Cost of det remained stable at 3% as at end December 2024, with 77% of total debt on fixed rates. Management expects its cost of debt to remain at around this level and guided at every 100 basis points (bps) increase in interest rates will weigh on DPS by 0.27 cents.
Analyst Ada Lim says: “All things considered, we roll forward our forecasts and finetune our assumptions. In particular, CLAS has completed the acquisition of lyf Funan Singapore and we factor this into our model. We also increase our risk-free rate assumption by 25bps to 2.75% to reflect expectations of fewer rate cuts by the Federal Reserve.”
Lim also like likes CLAS’ ongoing portfolio rejuvenation as a positive for long-term growth and sustainability.
Meanwhile, UOB Kay Hian also continues to rate CLAS a “buy” with a target price of $1.38.
Management sees a positive outlook for Australia, France, Japan and the US in 1QFY2025. CLAS will invest $130 million in AEIs for The Cavendish London and Sydney Central Hotel in 2025-2026. As CLAS executes its portfolio reconstitution strategy, there may be some unevenness in operating income caused by divestments and AEIs. However, analyst Jonathan Koh believes that CLAS could distribute non-periodic divestment gains to ensure it delivers stable distributions.
CLAS completed the divestment of the 124-unit Citadines Karasuma-Gojo serviced residence in Kyoto for 6.2 billion yen ($53.1 million) and the 389-unit Infiniti Garden rental housing in Fukuoka for 12.7 billion yen in October 2024. The properties were transacted at 40% and 55% above book value respectively.
In total, CLAS divested $505 million of assets and clocked cumulative divestment gains of $74 million in FY2024. The divestment of Somerset Olympic Tower, its serviced residence in Tianjin, China, is expected to complete in 2QFY2025. “The series of divestments demonstrated CLAS’ uncanny ability to create value through capital recycling,” says Koh.
CGS International too has an “add” call with an unchanged target price of $1.18 on CLAS.
Analyst Lock Mun Yee likes the counter for its stable DPU outlook and growth driven by AEIs.
In FY2025, CLAS is expected to register a net gain from the announced divestment of Somerset Olympic Tower Tianjin, according to management. CLAS will focus on two ongoing AEIs and Somerset Liang Court development in FY2025.
Re-rating catalysts include accretive acquisitions, while downside risks include unfavourable exchange rates and unexpected travel disruption.
As at 2.15pm on Jan 28, units in CLAS are trading at 89.5 cents.
