Analysts are positive on CapitaLand Ascott Trust HMN (CLAS) following the REIT’s FY2023 ended December 2023 results.
For the period, CLAS’ distribution per stapled security (DPS) rose 16% y-o-y to reach 6.57 cents, higher than FY2022’s 5.67 cents and pre-pandemic FY2019’s 6.4 cents.
Specifically in 2HFY2023, CLAS’s DPS rose 14% y-o-y to 3.8 cents, contributing to a 24% y-o-y growth in total distribution to $140.8 million for the same period.
The REIT’s gross profit for 2HFY2023 also saw a 12% y-o-y increase to $183.9 million, driven by the strong demand for its properties as the recovery of international travel remained on track.
Meanwhile, CLAS’s revenue per available unit (RevPAU) in 2HFY2023 exceeded that of pre-pandemic’s 2HFY2019 levels at 103% on a pro-forma basis, increasing 10% y-o-y to $157.
For the FY2023, RevPau rose 23% y-o-y to $148.
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CLAS also has a debt headroom of around $2 billion and a very comfortable gearing of 37.9%, thanks to an interest rate cover of 4x.
Read more here: CapitaLand Ascott Trust's FY2023 DPS rises 16% y-o-y, surpassing pre-Covid levels
Following the REIT’s healthy results, Citi Research analyst Brandon Lee, Maybank Securities analyst Krishna Guha and DBS Group Research analysts Geraldine Wong and Derek Tan are all keeping their respective “buy” calls, with Lee keeping his target price of $1.10 unchanged while Guha and the analysts at DBS raise their respective target prices to $1.10 from $1 and $1.30 from $1.20 previously.
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Lee notes that CLAS’s 2HFY2023 DPS has been driven by “one-off” items such as realised foreign exchange (forex) gains, higher RevPau and overseas acquisitions which were mitigated by divestments in September 2023 and higher debt expenses.
He writes: “Excluding one-off items, 2HFY23 DPU is flat y-o-y (up 23% h-o-h) at 3 cents. FY2023’s DPU of 6.57 cents comprised 113% of our estimates and 115% of consensus’ FY2023 estimates.”
On the REIT’s 4QFY2023 RevPAU, the Citi analyst continues to observe an improvement, albeit “at a slower pace” of just 4% y-o-y to $161, compared to 3QFY2023’s growth of 17%.
“Japan led the RevPAU rebound at a growth of 90% y-o-y, followed by the US at 12%, Vietnam at 8% and China at 7%. Similar to 3QFY2023, five countries’ RevPAU are above pre-Covid-19, namely Japan at 139%, the UK at 118%, the US at 115%, Australia at 113% and Singapore at 105%,” explains Lee.
He adds that the near-term outlook in 1QFY2024 “appears positive” for most of CLAS’ operating geographies, including Australia, France, the UK, Japan and the US, thanks to a variety of corporate, leisure and large-scale events.
Negatives noted by Lee include the stagnant RevPAU of China and Vietnam at 14% and 12% below pre-Covid levels in 4QFY2023 respectively, although this was an improvement from 20% and 16% in the previous quarter.
Meanwhile, the Citi analyst expects 1QFY2024 market demand to be “subdued” in Singapore, but mitigated partially by some uplift from large-scale concerts.
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He adds: “We see positive share price impact on strong earnings beat.”
Maybank analyst Guha shares a similar positive sentiment, having increased his target price due to CLAS’ recent acquisition, share placement and a lower discount rate.
He notes that the REIT’s portfolio value rose by 2%, thanks to stronger operating performance while a healthy outlook mitigated the impact of higher capitalisation and discount rates.
Guha writes: “CLAS remains focussed on portfolio reconstitution. Last fiscal year, CLAS divested $260 million at exit yield of 4.3% while acquiring $531 million of assets at 6.2% yield. Further, it has a pipeline of eight planned asset enhancements to uplift the portfolio.”
Upside factors noted by him include operating leverage and efficiency gains achieved during the lean pandemic period leading to higher margins, as well as accretive acquisitions from sponsors and third parties.
Conversely, downside factors include the deterioration of the global economy, resulting in declines in RevPAU. Significant forex volatility and higher-than-expected borrowing costs could also impede hedging and affect DPUs, while lower asset values would lead to higher leverage.
Lastly, DBS' Wong and Tan have revised their DPU estimates for FY2024/FY2025 at 6.4 cents and 6.5 cents respectivelty, from the previous 6 cents and 6.2 cents, representing an around 8% y-o-y growth in terms of core DPU.
They write: "We continue to see opportunity for CLAS to increase overall portfolio occupancy and extract further growth, aided by the ramp up of asse enhancement intiative (AEI) completions, including Singapore’s The Robertson House asset."
As at 4.15 pm, units in CapitaLand Ascott Trust are trading at 1.5 cents higher or 1.58% up at 96 cents.
