Date: October 2, 2024
Broker: UOB Kay Hian Private Limited
Company Overview
CapitaLand Ascott Trust (CLAS) is a real estate investment trust (REIT) that invests in income-producing real estate, primarily used as serviced residences, rental housing, student accommodation, and other hospitality assets globally. As of the report’s date, CLAS has a market capitalization of S$3.69 billion (US$2.87 billion) with 3,786.5 million shares issued.
Stock Data
- Bloomberg Ticker: CLAS SP
- Share Price (as of October 2, 2024): S$0.975
- Target Price: S$1.38 (previous TP: S$1.37)
- Upside Potential: 41.5%
- Major Shareholders: Temasek Holdings owns 33.6% of the trust.
- Sector: Real Estate
Key Financial Metrics
| Financial Metric |
2023 |
2024F |
2025F |
2026F |
| Net Turnover (S$m) |
745.0 |
762.0 |
741.0 |
764.0 |
| EBITDA (S$m) |
302.0 |
329.0 |
351.0 |
362.0 |
| Net Profit (Adjusted, S$m) |
99.0 |
146.0 |
161.0 |
168.0 |
| Distribution per Unit (DPU) (S$ cent) |
6.6 |
5.5 |
5.9 |
6.1 |
| DPU Yield (%) |
6.7 |
5.6 |
6.0 |
6.3 |
Recent Acquisition of lyf Funan
Acquisition Details:
- CLAS has entered into an agreement to acquire lyf Funan, a 329-room property located in Singapore’s Civic District.
- The acquisition is priced at S$263 million, representing a 1.9% discount to independent valuations.
- The property provides an EBITDA yield of 4.7%, higher than the exit EBITDA yield of 3.2% from the divestment of Citadines Mount Sophia in March 2024.
- The acquisition is expected to be DPU-accretive at 1.5% on a pro forma basis for 2023.
Strategic Importance:
- lyf Funan is tailored for next-generation travelers, offering social living spaces and dynamic design. Occupancy exceeded 80% in 1H24, outperforming comparable properties.
- After the acquisition, CLAS’s exposure to Singapore will increase from 16% to 19% of total assets.
Funding:
- The purchase consideration of S$146.4 million will be funded by proceeds from the divestment of Citadines Mount Sophia and a debt drawdown at an all-in interest rate of 3.5%.
- The acquisition is expected to increase CLAS’s total distribution by S$3.5 million.
Long-term Lease Agreement:
- CLAS will enter a long-term master lease with its sponsor, Ascott Limited, for lyf Funan, with an initial term of 20 years, renewable for another five years.
- Rent payable will be 93.5% of the gross operating profit of the property.
Stock Performance
CLAS’s stock has shown the following price performance over different time periods:
- 1-month: 7.1%
- 3-month: 10.8%
- 6-month: 3.2%
- 1-year: 1.6%
- Year-to-date: -1.5%
The stock’s 52-week high was S$1.01, and the low was S$0.845.
Financial Outlook and Risks
- The 2025 DPU forecast has been raised by 1.6% due to the acquisition of lyf Funan.
- CLAS maintains a strong distribution yield of 6.0% for 2025.
- Aggregate leverage is expected to be 39.1% following the acquisition, providing a stable debt-to-equity structure for future growth.
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation for CapitaLand Ascott Trust, with a target price of S$1.38 based on the dividend discount model (DDM), which assumes a cost of equity of 7.0% and terminal growth of 2.8%.
Share Price Catalysts:
- Recovery of international arrivals and increased leisure travel demand.
- Yield-accretive acquisitions in student accommodation and rental housing segments.
