Excerpts from Maybank report
CapitaLand Ascendas REIT (SGX: A17U)
- CapitaLand Ascendas REIT 3Q24 business update confirmed the unchanged trend of steady operations and stable financial metrics.
- Rent reversion was mid-teens, led by logistics with management reiterating full-year guidance of high single digit positive reversion.
- Occupancy in Singapore was stable while overseas slipped, as expected. Gearing inched up while cost of debt and coverage ratio was stable.
- CapitaLand Ascendas REIT focus is on capital recycling with recent divestment of a logistics asset in Singapore above book to a DC operator.
Maintain BUY and TP of SGD3.10.
Steady operations
Portfolio occupancy was 92.1% vs 93.1% for 2Q. It was stable in Singapore and Europe/UK. Occupancy slipped in the US and Australia due to non renewals in Raleigh business park and Sydney logistics.
Portfolio rent reversion was +14.4% in 3Q24, led by logistics (1H +13.4%), well ahead of reaffirmed but possibly conservative full-year guidance of high single digit.
Stable financial metrics
Gearing was at 38.9% vs 37.8% in 2Q24. Cost of debt and interest-coverage ratio was unchanged at 3.7% and 3.5x, respectively.
After the close of the quarter, CapitaLand Ascendas REIT (CLAR) announced divestment of a ramp-up warehouse with an ancillary office block for SGD112.8m, at 67% premium to book and exit gross yield of 4.8%.
The property is 100% occupied as of Jun’24. Divestment proceeds may be used for capex, debt repayment or top-ups. DC operator, GDS, is acquiring the asset after being one of the awardees of the combined 80MW DC capacity given in Jul’23.
The steep premium may be reflective of property attributes. The 430K sq. ft. NLA asset comes with a floor loading in excess of 30kPa and floor-to-ceiling height of 7.5m or above for the warehouse, c.31 years of remaining land lease and close to an existing DC cluster.
Valuation/Recommendation
CLAR owns the largest new economy AUM among peers – business space & life sciences, logistics and data centres – together represent 81% of its SGD16.4b portfolio.
Greater clarity on acquisition growth trajectory, with Australian, UK and US assets driving earnings visibility and Singapore properties entrenching business space footprint.
Proactive portfolio reconstitution has strengthened its balance sheet. We expect management will endeavour to recycle capital into higher-yielding and newer assets.
Maintain buy. Our forecasts and TP are unchanged due to limited financial disclosures. While we expect occupancies to fluctuate for business parks and the
oversupplied warehouse micro-markets, CLAR’s diversified revenue profile, strong credit and capital recycling should stabilize its bottom line.
In addition, DPUs for FY22-25E to be resilient given favourable logistics, business parks and hi-specs industrial exposure, and rising contribution from recent overseas acquisitions.
Downside may come from rapid overseas expansion, especially in US business park and Europe DCs. Older Singapore business parks may need capex and face transitory downtime.
You can find the full report here and the company website here.
