CapitaLand Ascott Trust - DBS Research 2024-01-30: Cream Of The Crop

• CapitaLand Ascott Trust (SGX:HMN) reported 2H23 revenue of S$397.6m (+12% y-o-y) and gross profit of S$140.8m (+24% y-o-y). Full year revenue and gross profit came in at S$744.5m (+20% y-o-y) and S$338.2m (+20% y-o-y)
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FY23 distribution ahead of estimates

• Distributable income rose 25% y-o-y to S$237m, and included a one-off foreign exchange gain of S$41.5m (translating to ~1.1 cents/share).
• CapitaLand Ascott Trust's DPU for FY23 at 6.57 cents represented a 16% y-o-y increase, exceeding our estimates.
• Gearing remains at a healthy level of 37.9%, while average cost of debt was low at 2.4% as at end FY23, with guidance at below 3% for FY24. 81% fixed hedged ratio with interest coverage ratio of 4.0x.
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More room for organic growth by raising occupancy to pre-COVID levels.

• CapitaLand Ascott Trust’s outperformance continues to stem from the strong ADR that its assets command. Occupancy in 4Q23 at 77% was still at ~92% of pre-COVID levels, with further room for normalisation.
• We continue to see opportunity for CLAS to increase overall portfolio occupancy and extract further growth, aided by the ramp up of AEI completions, including Singapore’s The Robertson House asset. Master lease contracts continue to see strong renewal from both a higher variable rent component and higher base component, rising 21% y-o-y in 2H23.
• Longer stay properties maintained their resilience with high occupancy in the range of ~95% with rental growth at ~6% y-o-y, in line with expectations. MCMGI’s RevPAU rose ~16% y-o-y on a same store basis, reaching ~110% of pre-COVID levels.

Strategic enhancements to yield accretion to NAV in the coming years while maintaining strong growth visibility.

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Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2024-01-30 SGinvestors.io

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