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Analysts keep 'buy' call on CapitaLand Ascott Trust after FY2022 beat

Jovi Ho
·3-min read

FY2022 distribution per unit of 5.67 cents is up 31% y-o-y.

CapitaLand Ascott Trust (CLAS) is “reaching for the stars and beyond” following the release of their FY2022 ended December results on Jan 30, say DBS Group Research analysts Geraldine Wong and Derek Tan.

CLAS’s investment portfolio primarily comprises real estate, used mainly for hospitality purposes or rental housing. The REIT is on the cusp of a “multi-year recovery trajectory”, write Wong and Tan.

According to DBS, distribution per unit (DPU) growth in 2023 is sustainable and led by occupancy recovery across all geographical markets, contributions from recent acquisitions and turnaround in slower performing markets such as Vietnam, Japan and China.

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In a Jan 31 note, Wong and Tan maintain “buy” on CLAS with an unchanged target price of $1.30.

CLAS reported a strong set of results for 2HFY2022, say Wong and Tan, with topline revenue at $353.8 million, up 69% y-o-y; and gross profit at $164.4 million, up 80% y-o-y.

This was due to higher organic performance of existing assets and contributions from new properties. On a same asset basis, 2HFY2022 gross profit was up 67% y-o-y.

For FY2022, topline revenue at $621 million is up 58% y-o-y; and gross profit of $282 million is up 63% y-o-y, surpassing Wong and Tan’s full-year estimates at $576 million and $252 million respectively.

Correspondingly, full year distribution at $190 million, up 38% y-o-y and DPU of 5.67 cents, up 31% y-o-y, exceeded Wong and Tan’s estimates.

Markets previously experiencing headwinds will see a turnaround in 2023 and lead growth, add the DBS analysts.

CLAS portfolio revenue per available unit (RevPAU) recovered to 100% of normalised levels in FY2022. Portfolio RevPAU rose 78% y-o-y and 17% q-o-q, meeting pre-pandemic 4QFY2019 levels.

“We see further upside stemming from steady daily room rates coupled with longer length of stay, recovery in occupancy rate with Japan and China travellers partaking in global travel and strong corporate demand globally with the return of MICE [meetings, incentives, conferences and exhibitions] events,” write Wong and Tan.

Inorganic growth prospects remain strong going forward, they add, with the conversion of two Singapore assets (Riverside Hotel Clarke Quay and Ascott Orchard) to management contract terms with higher rental upside potential and ideal completions in FY2023-2024.

Wong and Tan believe CLAS will continue its current strategy in asset recycling to drive earnings and net asset value (NAV) upside.

A healthy gearing level of 38% and $1.8 billion debt headroom supports CLAS’s growth appetite.

Divestments continue to be a top priority to further accelerate CLAS’s portfolio rejuvenation efforts, alongside acquisitions to get a step nearer to its target exposure within the longer-stay segment at 25%-30%.

UOB Kay Hian ups TP

UOB Kay Hian analyst Jonathan Koh is also remaining positive on CLAS with a "buy" call and a higher target price of $1.39, up from $1.37 before.

To the analyst, CLAS's 2HFY2022 results reflect its "continued recovery" with a "strong sequential momentum".

CLAS's portfolio valuation is also "stable" as at Dec 31, 2022, along with its "resilient balance sheet". 

On the back of the continued recovery in the hospitality sector, Koh has upped his DPU forecast for FY2023 by 1.5%.

To him, the reopening of China's international borders and the continued recovery in corporate demand is a share price catalyst for CLAS. Yield-accretive acquisitions for student accommodation and rental housing is another factor that could drive CLAS's unit price, he adds.

As at 10.12am, units in CLAS are trading 1 cent higher, or 0.89% up, at $1.13.

As at 10.12am, units in CLAS are trading 1 cent higher, or 0.89% up, at $1.13.

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