CapitaLand Ascott Trust: Financial Analysis with 10% Net Profit Growth

Business Description

CapitaLand Ascott Trust (CLAS) is the largest lodging trust in the Asia-Pacific region, with an asset value of S\$8.8 billion as of December 31, 2024. Its core operations focus on income-producing real estate assets, including serviced residences, rental housing properties, student accommodations, and other hospitality assets. The trust operates across 45 cities in 16 countries, with properties located in major gateway cities such as London, Tokyo, Singapore, Paris, and New York. CLAS properties are managed under prominent brands such as Ascott, Somerset, Quest, and Citadines.

The company is a significant player in the lodging industry. Its diversified portfolio and geographic footprint provide resilience against market volatility. Key competitors include other global lodging trusts and real estate investment trusts (REITs). CLAS generates revenue from stable income sources like master leases and growth income sources like serviced residences and hotels.

Key Financial Highlights

The financial report for FY 2024, dated January 27, 2025, highlights the following:

• Revenue Growth: Revenue increased by 9% year-on-year (y-o-y) to S\$809.5 million for FY 2024, driven by strong operating performance, acquisitions, and asset enhancement initiatives (AEIs) [[3]].
• Net Profit Growth: Gross profit grew by 10% y-o-y to S\$370.9 million [[3]].
• Distribution Per Stapled Security (DPS): Core DPS increased by 1% y-o-y to 5.49 cents for FY 2024. Total DPS, including non-periodic items, was 6.10 cents, a 7% decrease compared to FY 2023 due to adverse currency impacts and higher financing costs [[3]].
• Dividend Payments: For 2H 2024, the dividend was 3.55 cents per Stapled Security, with a book closure date of February 6, 2025, and payment date of February 28, 2025 [[3]].
• Revenue Per Available Unit (REVPAU): REVPAU grew by 6% y-o-y to S\$167 for 2H 2024, with markets like Japan seeing a 37% increase [[1]].
• Debt Management: The average cost of debt remains low at 3% per annum, with 77% of the debt on fixed rates. Gearing is 38.3%, well below the 50% regulatory limit [[3]].

Special Activities and Strategic Actions

CLAS is actively pursuing portfolio reconstitution to enhance profitability and value. In 2024, the trust completed over S\$500 million in divestments at premiums of up to 55% over book value, unlocking S\$74 million in net gains. Proceeds were reinvested into higher-yielding assets such as rental housing in Japan, student accommodation in the U.S., and the lyf Funan Singapore property. Additionally, significant AEIs were completed for six properties, including Citadines Holborn-Covent Garden and Temple Bar Hotel Dublin [[6]].

Future projects include AEIs for The Cavendish London and Sydney Central Hotel, expected to complete by 2026, and the construction of a new Somerset serviced residence in Clarke Quay [[6]].

Strengths

• Diversified Portfolio: Geographic and operational diversification reduces exposure to market-specific risks [[4]].
• Strong Revenue Growth: Revenue and gross profit growth of 9% and 10%, respectively, indicate robust operational performance [[3]].
• Efficient Debt Management: Low average cost of debt at 3% and a healthy gearing ratio of 38.3% provide financial stability [[3]].
• Active Asset Management: AEIs and portfolio reconstitution have unlocked significant value [[6]].

Risks

• Currency Fluctuations: Depreciation of foreign currencies against the Singapore Dollar impacted distributions [[3]].
• Higher Financing Costs: Rising interest rates and financing expenses could pressure future profitability [[3]].
• Near-Term Income Volatility: Ongoing AEIs and divestments may lead to uneven operational income in the short term [[2]].

Investor Recommendations

For Current Investors

Hold. CLAS demonstrates strong revenue growth, efficient capital management, and potential for long-term value creation through AEIs and acquisitions. Its stable portfolio provides resilience amid macroeconomic uncertainties.

For Prospective Investors

Buy. The trust’s proactive portfolio reconstitution strategy, diversified income sources, and strong growth prospects make it an attractive investment for long-term gains.

Disclaimer

The above recommendations are based solely on the provided financial report and do not constitute financial advice. Investors should conduct their own research or consult a financial advisor before making any investment decisions.

View CapLand Ascott T Historical chart here