CapitaLand Ascendas REIT - Maybank Research 2024-02-02: Limited Upside; Downgrade To HOLD

• CapitaLand Ascendas REIT (SGX:A17U) reported 2H23 DPU of S$0.0744, -3.6% h-o-h, -6.1% y-o-y. FY23 DPU of S$0.1516 was -4% y-o-y, 2% below consensus and our estimates.
• We cut our DPU estimates by ~6%. Combined with a lower discount rate, our DDM-based target price inches up to S$2.75, leaving us with limited upside of 2% and forcing us to downgrade CapitaLand Ascendas REIT to HOLD.

Strong reversions but sharp rise in borrowing cost

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• Portfolio metrics were mixed with mild slippage in occupancy but mid-teens positive reversion. Same-store valuation was lower.

Higher costs offset top-line growth

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• Growth in utility costs and property taxes moderated the growth in NPI and led to 250bps lower margins for the full year.
• Furthermore, CapitaLand Ascendas REIT's borrowing cost jumped 26% and 37% y-o-y for 2H and full year, respectively, due to 20/100bps increases in funding cost on h-o-h/ y-o-y basis to 3.5%. Funding cost guide is for 4.0% for FY24. Gearing rose ~120bps h-o-h to 37.9%.

Strong reversions, lower occupancy

• Read more at SGinvestors.io.

Krishna Guha Maybank Research | https://www.maybank-ke.com.sg/ 2024-02-02 SGinvestors.io

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