CapitaLand Ascott Trust - CGS-CIMB Research 2022-10-31: More Recovery And Portfolio Reconstitution

CapitaLand Ascott Trust - More Recovery And Portfolio Reconstitution

  • CapitaLand Ascott Trust (SGX:HMN)'s 3Q22 gross profit recovered to ~90% of pre-COVID-19 levels, boosted by contributions from 8 new properties and an 88% y-o-y jump in portfolio RevPAU. Excluding the 8 properties, same-store gross profit rose 70% y-o-y.
  • 3Q22 RevPAU reached 87% of pre-COVID-19 levels with 5 out of 8 key geographies (Australia, France, Sin gapore, UK, US) close to or at pre-COVID-19 levels while that for China, Japan and Vietnam was 73%, 39% and 69% of pre-COVID-19 levels.
  • 3Q22 portfolio occupancy came in above 70%, an improvement vs 2Q22’s ~70%. 22 out of 31 master leases have fixed and variable structures, of which 19 received minimum rent in 3Q22.
  • Occupancy at CapitaLand Ascott Trust’s US purpose-built student accommodation (PBSA) assets improved q-o-q from 95% to 99% for academic year 2022- 23, securing above-market rent growth of ~6% y-o-y.
  • CapitaLand Ascott Trust refinanced ~S$400m or 15% of its loans in 3Q22, extending its weighted average debt maturity from 3.1 to 3.5 years and reducing the amount of loans maturing in FY22F-23F from 41% to 24%. Effective borrowing cost remained stable q-o-q at 1.7% as CapitaLand Ascott Trust commenced refinancing negotiation much earlier in the y ear.
  • Gearing fell q-o-q from 37.5% to 35.8% due to S$170m in equity raised to partially fund the acquisition of nine assets announced in Oct 22 but will increase to ~38% post acquisition in 4Q22. CapitaLand Ascott Trust has > S$1bn debt headroom before reaching 45% gearing and continues to evaluate acquisitions, divestments and AEIs to unlock value for unitholders.
  • While the higher interest rate environment has led to pricing uncertainty and a slowdown in transactions, CapitaLand Ascott Trust stands ready to acquire should opportunities arise, focusing on underlying fundamentals as a screening criterion. The management has also identified several assets that have reached their optimum life cycles as possible divestment candidates.
  • 56% of 3Q22’s gross profit was derived from stable income sources, which include master leases, management contracts with minimum guaranteed income (MCMGI), rental housing and PBSA. The lease structures, long average length of stay and counter-cyclical asset types have shown resilience through the pandemic and are likely hold up well in a recessionary situation.
  • No change in our estimates for CapitaLand Ascott Trust. CapitaLand Ascott Trust's Share Price is trading at FY22F/23F DPU yield of 6.0%/6.9%. Our target price for CapitaLand Ascott Trust implies FY23F DPU yield of 6.9%, +0.8 standard deviation from 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 | 2022-10-31
SGX Stock Analyst Report ADD MAINTAIN ADD 1.250 SAME 1.250

Previous report by CGS-CIMB:
2022-10-07 CapitaLand Ascott Trust - Recovery & Inorganic Growth Ahead

Check out the most recent target prices at CapitaLand Ascott Trust Target Prices. Listing of analyst research reports at CapitaLand Ascott Trust Analyst Report.

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