CapitaLand Ascott Trust

Excerpts from UOBKayHian report

CapitaLand Ascott Trust (SGX: HMN)

• CapitaLand Ascott Trust (CLAS)’ portfolio RevPAU recovered 88% yoy and 6% qoq to S$132 in 3Q22, which is 87% of pre-pandemic levels on a pro forma basis, due to higher occupancy (>70% in 3Q22) and ADR (9M22: +40% yoy).
• China and Singapore recorded strong sequential growth, while Australia and the US continued to perform at close to pre-pandemic levels. Aggregate leverage was healthy at 35.8%, while cost of debt was stable at 1.7%. 2023 distribution yield is attractive at 6.5%.

Maintain BUY. Target price: S$1.27.

Gross profit grew 70% yoy on same-store basis

Growth in revenue and gross profit was driven by contributions from eight new properties and stronger operating performance of the existing portfolio. Gross profit accounted for 90% of pre-pandemic levels on a pro forma basis. Excluding the contributions from the eight properties, same-store gross profit grew 70% yoy in 3Q22.

CapitaLand Ascott Trust recovery momentum sustained into 3Q22

Portfolio RevPAU recovered 88% yoy and 6% qoq to S$132 in 3Q22, which is 87% of pre-pandemic levels on a pro forma basis, due to higher occupancy (>70%) and average daily rates (ADR) (9M22: +40% yoy). China and Singapore recorded strong growth of 28% and 27% qoq respectively. Australia and the US continued to perform at close to pre-pandemic levels.

China: Recovery led by pick-up in domestic corporate travel

RevPAU rebounded 28% qoq but was flat yoy at Rmb278 in 3Q22. Occupancy recovered from 50% in 2Q22 to 70% in 3Q22 driven by corporate long stays and project groups. The average length of stay was 6.5 months. Domestic corporate transient demand picked up after the quarantine duration was shortened by half to seven days in Jun 22.

Singapore: Tourists back for F1 Singapore Grand Prix and MICE events

RevPAU for Citadines Mount Sophia (CMS) grew 174% yoy and 28% qoq to S$178 in 3Q22. CMS’ ADR is 30% above pre-pandemic levels, while occupancy was above 90%. Lyf one-north achieved occupancy of above 90% supported by long-stay bookings from companies and educational institutions located nearby. The two properties are expected to benefit from higher ADR in 4Q22 due to the year-end holiday season.

Valuation/Recomendation

Maintain BUY. Our target price of S$1.27 is based on DDM (cost of equity: 7.5%, terminal growth: 2.6%). Yield-accretive acquisitions for student accommodation and rental housing. Full-year contributions from maiden development project lyf one-north in 2022. Recovery of the hospitality industry in Europe, the US, Japan and Singapore, followed by other countries in the Asia Pacific region.

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