Excerpts from UOBKayHian report

CapitaLand Ascendas REIT (SGX: A17U)

• CapitaLand Ascendas REIT (CLAR) continued to clock strong positive rental reversion of 15.2% in 4Q23 (Singapore: 16.9%, Australia: 21.8%, the US: 11.0%).
• Portfolio occupancy eased slightly by 0.3ppt qoq to 94.2% in 4Q23. CLAR has a resilient balance sheet with average debt maturity at 3.4 years.
• Management plans to scale up in new economy assets, including logistics properties. CLAR provides a resilient 2024 distribution yield of 5.3% (MINT: 5.6%).

Maintain BUY with a target price of S$3.62.

Growth via acquisitions and higher occupancies

Gross revenue grew 11.0% yoy in 2H23 due to the acquisition of three Singapore properties, namely 622 Toa Payoh Lorong 1, 1 Buroh Lane and The Shugart in Jan 23, Feb 23 and May 23 respectively.

NPI increased 4.6% yoy despite higher utility expenses and property taxes in Singapore. Finance costs increased 26.5% yoy.

Strong rental reversion from multiple drivers

CLAR achieved positive rental reversion of 15.2% in 4Q23, driven by Singapore (16.9%), Australia (21.8%) and the US (11.0%).
Logistics properties in Singapore and Australia recorded strong positive reversions of 53.6% and 9.1% respectively.

Business space properties in Singapore, Australia and the US recorded positive reversions of 13.1%, 22.3% and 11.0% respectively.

Lower occupancy in the US

Portfolio occupancy eased 0.3ppt qoq to 94.2% in 4Q23. Occupancy for the US slipped 1.7ppt qoq to 90.4% due to downsizing by Nike in Portland/

 NAV per unit declined 4.6% yoy S$2.26

CLAR suffered valuation losses of S$466m for the US (-18.5%) and S$102m for Australia (-4.5%). This was partially offset by valuation increases of S$239m for Singapore (+2.4%) and S$41m for the UK/Europe (+2.7%).

Overall, CLAR’s portfolio valuation declined by 1.8% on a same-store basis.

Valuation/Recommendation

Maintain BUY. Our target price of S$3.62 is based on DDM (cost of equity: 7.0%, terminal growth: 2.5%). Resiliency and growth from business parks, hi-tech buildings, life sciences, logistics and data centre segments and contributions from development projects and AEIs.

You can find the full report here and the company website here.