Advertisement
Singapore markets closed

  • Straits Times Index

    3,410.81
    -29.07 (-0.85%)
     

  • Nikkei

    40,912.37
    -1.28 (-0.00%)
     

  • Hang Seng

    17,799.61
    -228.67 (-1.27%)
     

  • FTSE 100

    8,203.93
    -37.33 (-0.45%)
     

  • Bitcoin USD

    56,479.30
    +2,137.63 (+3.93%)
     

  • CMC Crypto 200

    1,175.54
    -33.15 (-2.74%)
     

  • S&P 500

    5,567.19
    +30.17 (+0.54%)
     

  • Dow

    39,375.87
    +67.87 (+0.17%)
     

  • Nasdaq

    18,352.76
    +164.46 (+0.90%)
     

  • Gold

    2,399.80
    +30.40 (+1.28%)
     

  • Crude Oil

    83.44
    -0.44 (-0.52%)
     

  • 10-Yr Bond

    4.2720
    -0.0830 (-1.91%)
     

  • FTSE Bursa Malaysia

    1,611.02
    -5.73 (-0.35%)
     

  • Jakarta Composite Index

    7,253.37
    +32.48 (+0.45%)
     

  • PSE Index

    6,492.75
    -14.74 (-0.23%)
     

CapitaLand Ascendas REIT 'continues to surprise' with FY2022 occupancy at 10-year high, higher DPU: analysts

Jovi Ho
·4-min read

CLAR posted 3.5% higher y-o-y distribution per unit of 15.798 cents for FY2022 ended December.

CapitaLand Ascendas REIT (CLAR) boasts a diversified portfolio of future-ready assets, say analysts, with results for FY2022 ended December in line with market expectations.

In a Feb 2 note, CGS-CIMB Research analysts Lock Mun Yee and Natalie Ong maintain “add” on CLAR with a higher target price of $3.06 from $2.98, which represents a 4.2% upside against the last traded price of $2.94.

CLAR is Singapore’s first and largest listed business space and industrial real estate investment trust. It has a diversified portfolio comprising assets in Singapore, the UK, Europe, Australia and the US. CLAR is managed by CapitaLand Ascendas REIT Management Limited, a wholly-owned subsidiary of Singapore-listed CapitaLand Investment Limited.

ADVERTISEMENT

CLAR posted 3.5% higher y-o-y distribution per unit (DPU) of 15.798 cents, underpinned by portfolio occupancy reaching a 10-year high of 94.6% in FY20222 ended December.

Gross revenue for FY2022 rose by 10.3% y-o-y to $1.35 billion. Net property income (NPI) rose by 5.2% y-o-y to $968.8 million.

In FY2022, CLAR completed $223 million worth of new acquisitions and the redevelopment of the UBIX building in Singapore, where signing rents are now 20% higher than previously expected. CLAR achieved average rental reversion of 8% for FY2022.

Aggregate leverage dipped to 36.3% at end-FY2022. Interest cost rose to 2.5% at end-FY2022 while 79.4% of debt hedged into fixed rates. Every 50 basis points (bps) increase in interest rates would impact DPU by 0.15 cents.

“With a higher cost of capital, CLAR remains selective on inorganic growth opportunities,” note Lock and Ong.

CLAR’s Singapore portfolio occupancy increased q-o-q to 92.1% from 91.8% in 3QFY2022. It achieved positive rental reversion of 7% in Singapore, led by a strong rental reversion of 11.1% at its logistics properties.

Management guided that it expects reversions in Singapore to be in the positive mid-single-digit range for FY2023, say Lock and Ong. “CLAR has 25.6% of leases to be renewed in Singapore in FY2023, mainly in the industrial and data centre as well as business space and life sciences segments. Management guided that it had locked in a two-year utilities contract at higher cost and this is likely to erode near-term NPI margin.”

Lock and Ong lower their FY2023-2024 DPU estimates by 7.5%-8% on the back of higher operating and funding cost assumptions. “We continue to like CLAR for its diversified and resilient portfolio and healthy balance sheet. Potential catalysts include faster-than-expected global recovery and accretive new acquisitions. Downside risks include a protracted economic downturn.”

Next leg of growth

Meanwhile, DBS Group Research analysts Dale Lai and Derek Tan maintain “buy” on CLAR with an unchanged target price of $3.40.

“Tapping on its sponsor’s pipeline and through its extensive network, CLAR has demonstrated its ability to continuously source for accretive acquisitions to complement its existing portfolio. Its Sponsor’s development capabilities also provide CLAR with the opportunity to undertake development and redevelopment projects that usually generate higher returns and superior revaluation gains,” write Lai and Tan in a Feb 3 note.

CLAR’s $617.4 million of ongoing projects will drive earnings as they come online over the next three to four years, say Lai and Tan. “Approximately $233 million of these projects are due to complete in 2HFY2023. CLAR will continue to evaluate its portfolio and lookout for more improvement projects that will drive earnings growth.”

CLAR’s resilience continues to surprise on the upside, say Lai and Tan. “Despite higher operating expenses and financing costs, CLAR continues to report earnings growth. its active portfolio management and asset enhancement projects have led to improved yields at these properties. The quality of its portfolio has also ensured that CLAR continues to enjoy improvement in occupancy rates and strong positive rental reversions.”

Further positive rental reversions expected in FY2023 will continue to support the upward trajectory in earnings, they add.

Units in CLAR closed 6 cents higher, or 2.04% up, at $3 on Feb 3.

See Also: