CapitaLand Ascott Trust (CLAS): A Deep Dive Into Asia Pacific’s Largest Lodging Trust

CapitaLand Ascott Trust (CLAS), Asia Pacific’s largest lodging trust, boasts an extensive portfolio of 100 properties across 45 cities in 16 countries. As of 31 December 2024, its diversified portfolio includes hotels, serviced residences, rental housing, and student accommodation, providing a balanced mix of stable and growth income sources. CLAS has been recognized as the Global Sector Leader (Listed – Hotel) by GRESB for four consecutive years.

Recent Developments and Strategic Moves

On 31 January 2025, CLAS announced the acquisition of two prime freehold hotels in Japan for JPY21 billion (approximately SGD178.5 million), representing an 8.3% discount to their independent valuation. The new properties—ibis Styles Tokyo Ginza, a 224-unit hotel in Tokyo’s upmarket Ginza district, and Chisun Budget Kanazawa Ekimae, a 392-unit hotel in Kanazawa—will be operated under management contracts, enabling CLAS to capture income upside from improved operating performance.

Funding and Financial Impact

The acquisition will be partially funded by JPY7.7 billion in proceeds from previous divestments of three WBF hotels in Osaka and Infini Garden in Fukuoka, with the remaining JPY14.9 billion financed through debt. The blended net operating income (NOI) yield for the acquisition is 4.3% for FY24, significantly higher than the ~2% blended exit NOI yield of the divested properties. On a pro forma basis, distributions are expected to increase by SGD3.9 million, with distribution per stapled security (DPS) rising by 0.1 Singapore cents (+1.6%) to 6.2 Singapore cents for FY24.

Fair Value and Market Performance

OCBC Investment Research maintains a fair value (FV) estimate of SGD0.99 for CLAS, with the REIT’s properties in Japan now accounting for 18% of its overall portfolio. Japan has been a standout market, with revenue per available unit (RevPAU) rising 37% year-on-year in 4Q24. CLAS’s focus on portfolio rejuvenation and stable distributions is expected to enhance the sustainability and quality of its DPS over the long term.

ESG and Sustainability Initiatives

While CLAS’s ESG rating was downgraded in June 2024 due to corporate governance concerns, the trust continues to lead its peers in business ethics and environmental stewardship. Approximately 37% of its portfolio area is certified to green building standards, aligning closely with the industry average of 39.4%. CLAS also promotes energy conservation among tenants, further strengthening its sustainability credentials.

Key Financials

• FY24 Gross Revenue: SGD809.5 million
• FY24 Gross Profit: SGD370.9 million
• FY24 DPS: 6.10 Singapore cents (yield: 6.8%)
• FY24 Gearing Ratio: 38.3%

Recommendation

OCBC Investment Research reiterates its BUY rating for CLAS, highlighting its well-diversified portfolio, strategic acquisitions, and commitment to sustainable growth.

CDL Hospitality Trusts (CDLT): A Solid Performer in Hospitality

CDL Hospitality Trusts (CDLT) remains a strong contender in the hospitality sector. Its FY25 and FY26 estimated price-to-earnings (P/E) ratios are 19.4x and 17.8x, respectively, with a price-to-book (P/B) ratio of 0.6x for both years. Dividend yields are projected at 6.6% for FY25 and 6.9% for FY26, while its FY25 and FY26 estimated return on equity (ROE) stands at 2.8% and 3.1%, respectively.

Recommendation

While the report does not explicitly state a recommendation for CDLT, its financial metrics indicate a solid investment option for those seeking stable returns in the hospitality sector.

Far East Hospitality Trust (FAEH): A Competitive Player

Far East Hospitality Trust (FAEH) has demonstrated resilience with FY25 and FY26 estimated P/E ratios of 17.5x and 16.4x, respectively, and a P/B ratio of 0.7x for both years. Its dividend yields are estimated at 6.8% for FY25 and 6.7% for FY26, while ROE is projected at 3.6% in FY25, rising to 3.9% in FY26.

Recommendation

FAEH provides a competitive option for investors with its consistent dividend yields and improving ROE metrics.

Frasers Hospitality Trust (FRHO): A Niche Opportunity

Frasers Hospitality Trust (FRHO) offers attractive dividend yields of 3.7% for FY25 and 3.8% for FY26. However, its financial data lacks estimates for certain key metrics, such as price-to-earnings and enterprise value-to-EBITDA ratios, limiting a deeper analysis.

Recommendation

FRHO may appeal to income-focused investors due to its yield potential, but the absence of detailed metrics warrants a cautious approach.

Conclusion

CapitaLand Ascott Trust stands out as a leader in the lodging trust space, with its strategic acquisitions and focus on sustainability driving its robust performance. CDL Hospitality Trusts and Far East Hospitality Trust offer solid, stable returns, while Frasers Hospitality Trust provides niche opportunities for yield-focused investors. For those seeking exposure to the diverse and resilient hospitality sector, these REITs present compelling options tailored to varying investment objectives.