CapitaLand Ascott Trust - CGS-CIMB Research 2022-10-07: Recovery & Inorganic Growth Ahead

CapitaLand Ascott Trust - Recovery & Inorganic Growth Ahead

  • Latest hospitality data suggest strong pricing power by hoteliers, as reflected in May-Aug 22 RevPAR numbers, which have recovered to 93-104% of 2019 levels. RevPAR recovery is ahead of our expectation as we had pencilled in a full recovery in 2024F.
  • CapitaLand Ascott Trust (SGX:HMN)’s portfolio recovery is ahead of our expectations, prompting us to accelerate our forecasted recovery timeline. Within its eight key markets, Australia, France, Singapore and UK delivered 2Q22 RevPAUs between 96%-106% of 2Q19 levels. We raise our FY22F-24F NPI forecast for CapitaLand Ascott Trust by 5.4%-20.2% as we factor in a faster recovery. At the same time, we lower our divestment gains distribution assumption for the same period as we think that the divestment gains can be better deployed towards recent acquisitions.
  • Additionally, CapitaLand Ascott Trust announced advanced distribution of 1.078 cents from 1 Jul to 23 Aug 2022 as clean-up distributions in lieu of its recent private placement. This brings year-to-August DPU to 3.408 cents, forming 60.6% of our new FY22F DPU. As a result, FY22F DPU is raised 10.9% while FY23F and FY24F DPU dips 5.1% and 1.9% respectively.
  • Year-to-August, CapitaLand Ascott Trust has acquired S$443m in long-stay assets at a blended 3.5% yield. This brings the percentage of long-stay properties to 19% of AUM and income from stable sources to 71%, improving income visibility and resilience. In the mid-term, CapitaLand Ascott Trust intends to increase its long-stay asset allocation to 25-30% of AUM.
  • CapitaLand Ascott Trust’s AUM of S$8.3bn and gearing of 37.5% as at 2QFY22 affords it a sizeable S$1.8bn/S$1.0bn debt headroom based on 50%/45% gearing limit. Amongst its peers, CapitaLand Ascott Trust has the lowest cost of debt at 1.7% (vs. 1.8% and 2.3% for Far East Hospitality Trust (SGX:Q5T) and CDL Hospitality Trusts (SGX:J85)).
  • We keep our DDM-based target price of S$1.25 for CapitaLand Ascott Trust as our raised beta assumption of 0.73 offsets our adjusted FY22F-25F DPU.
  • CapitaLand Ascott Trust's Share Price is trading at FY22F and 23F DPU yield of 5.8% and 6.7% respectively. Our target price implies FY23F DPU yield of 5.2%, at -0.5 standard deviation of CapitaLand Ascott Trust’s historical average.

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | 2022-10-07

Read also CGS-CIMB's most recent report:
2022-10-31 CapitaLand Ascott Trust - More Recovery And Portfolio Reconstitution.

Price targets by 3 other brokers at CapitaLand Ascott Trust Target Prices.
Listing of research reports at CapitaLand Ascott Trust Analyst Reports.

Relevant links:
CapitaLand Ascott Trust Share Price History,
CapitaLand Ascott Trust Announcements,
CapitaLand Ascott Trust Dividends & Corporate Actions,
CapitaLand Ascott Trust News Articles

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