Excerpts from UOBKayHian report
CapitaLand Ascendas REIT (SGX: A17U)
- CapitaLand Ascendas REIT achieved an average rental reversion of 8.6% in 4Q24 (Singapore: +7.2%, Australia: +6.6%, UK/Europe: +10.9% and US: +11.6%).
- It saw a broad-based rise in occupancies across Singapore, Australia and the US. CLAR intends to expand its logistics portfolio in the US. It is redeveloping a data centre in Welwyn Garden City in the UK and logistics properties in Charleston in the US.
- CapitaLand Ascendas REIT provides a 2025 distribution yield of 5.8% (MINT: 6.4%).
Maintain BUY with a target price of S$3.51.
Generating growth from cost efficiency
CapitaLand Ascendas REIT (CLAR) reported DPU of 7.681 S cents for 2H24 (+3.2% yoy), which is in line with our expectation.
Gross revenue fell 1.1% yoy in 2H24 due to the divestment of three logistics properties in Australia and one logistics property in Singapore as well as the decommissioning of Welwyn Garden City in the UK and 5 Toh Guan Road East in Singapore for redevelopment.
NPI margin improved 1.8ppt yoy to 69.3% due to lower operating expenses. Thus, NPI grew 1.4% yoy. Finance costs decreased 1.9% yoy.
Broad-based rise in occupancies across Singapore, Australia and the US
Portfolio occupancy increased 0.7ppt qoq to a healthy 92.8% in 4Q24 with improvements across all geographies (Singapore: +0.5ppt qoq to 92.5%, Australia: +0.8ppt qoq to 92.5%, UK/Europe: unchanged at 99.3% and US: +1.8ppt qoq to 88.9%).
Occupancy for ONE@Changi City at Changi Business Park (CBP) improved 18ppt qoq to 99.5%. Occupancy for two logistics properties in Kansas City in the US, Lackman Business Centre 1-3 and 4, were restored back to 100%.
Clocked high single-digit positive rental reversion
CapitaLand Ascendas REIT achieved an average rental reversion of 8.6% for leases signed in 4Q24 (Singapore: +7.2%, Australia: +6.6%, UK/Europe: +10.9% and US: +11.6%). Logistics properties in Singapore clocked the strongest positive rental reversion of 17.8%.
Management expects average rental reversion to be positive mid-single digit for 2025.
Clocked small revaluation gain of S$11m
Portfolio valuation was relatively flat at S$16.8b on a same-store basis. The increase in valuations for Singapore (+2.8%) was offset by declines for Australia (-8.3%) and the US (-6.9%) caused by cap rate expansion of about 50bp. NAV per unit increased 0.4% yoy to S$2.27.
Prudent capital management
Aggregate leverage was stable at 37.7% as of Dec 24. Average cost of debt was unchanged at 3.7% in 4Q24. Management expects cost to debt to increase slightly but remain below 4% in 2025. 83% of CLAR’s borrowings are on fixed interest rates or hedged to fixed rates.
Resilient balance sheet
CLAR has a well-spread debt maturity profile with 13-14% of total borrowings maturing over the next three years. The average debt maturity is healthy at 3.5 years.
Valuation/Recommendation
Maintain BUY. Our target price of S$3.51 is based on DDM (cost of equity: 7.0% (previous: 6.75%), terminal growth: 2.5%). Share price catalyst include resiliency and growth from business parks, hi-tech buildings, life sciences, logistics and data centre segments.
Contributions from development projects, redevelopment projects and AEIs.
You can find the full report here and the company website here.Â
