CapitaLand Ascott Trust’s DPS Surpassed Pre-COVID Level: 6 Key Takeaways from FY2023 Results

January 30, 2024

CapitaLand Ascott Trust (SGX: HMN), commonly referred to as CLAS, has showcased an impressive financial performance, surpassing expectations as it forges ahead in its recovery journey.

CLAS stands out as one of our top picks for Singapore REITs in 2024, thanks to its well-diversified portfolio. This strategic mix not only ensures stability but also offers significant growth potential through its exposure to the dynamic hospitality sector.

The FY2023 results for CLAS demonstrate a playbook on how to thrive in the post-pandemic landscape. Here are five key takeaways from CLAS’s latest results that underscore its successful strategy and robust performance.

1. DPS surpassed expectations, and pre-COVID level

CLAS reported a remarkable 16% year-over-year (yoy) increase in distribution per stapled security (DPS) for FY2023, reaching 6.57 cents. This figure not only eclipses the previous year’s results but also surpasses analyst and Bloomberg consensus forecasts by a significant margin. Notably, this achievement also surpasses the pre-COVID distribution levels recorded in FY2018 and FY2019, marking a significant rebound and growth beyond the pre-pandemic era. Even when excluding the distribution of one-off realised exchange gains, the DPS stands at an impressive 6.46 cents, aligning closely with forecasts. The H2 2023 alone witnessed a 14% increase in DPS and a 24% growth in total distribution, amounting to S$140.8 million. Gross profit followed suit, with a 12% rise to S$183.9 million. These figures are bolstered by a 20% yoy revenue growth to S$744.5 million, fueled by both existing properties and strategic acquisitions.

2. Robust property performance

The strength of CLAS’s portfolio is evident in its property performance. Key markets such as China, Japan, the US, and Vietnam have shown significant growth in Revenue per Available Unit (RevPAU). In the fourth quarter of 2023 alone, RevPAU growth was observed at 4%, reaching 103% of pre-pandemic levels. On a same-store basis, CLAS achieved a 5% and 8% increase in gross profit and revenue, respectively, compared to H2 2022. This robust performance is further underscored by a fair value gain of S$156 million, indicating a healthy 2% increase in portfolio valuation.

3. Strategic Financial Positioning

CLAS’s financial strength is reflected in its strategic positioning. With an average cost of debt at a manageable 2.4% per annum and a significant proportion of debt on fixed rates (81%), the trust is well-poised to navigate market fluctuations. It boasts approximately S$1.32 billion in cash and available credit facilities, an interest rate cover of 4x, and substantial debt headroom of about S$2 billion, all well within the prudent gearing limit of 37.9%.

4. Aggressive Asset Enhancements and Acquisitions

CLAS has been proactive in enhancing its asset portfolio. Noteworthy developments include the topping out of Standard at Columbia in the US and the ongoing construction of the new Somerset serviced residence in Singapore. The rebranding of Riverside Hotel Robertson Quay to The Robertson House by The Crest Collection marks another strategic move to enhance its asset value.

5. Capital Raising and Smart Investments

The trust’s strategic foresight is evident in its capital-raising initiatives and smart investments. In August 2023, CLAS successfully raised S$300 million, which facilitated the acquisition of prime lodging properties in London, Dublin, and Jakarta, totalling S$530.8 million.

6. Management’s Visionary Approach

The leadership at CLAS, including Chairman Bob Tan and CEO Serena Teo, has been instrumental in balancing stable and growth income streams. Their focus on active portfolio reconstitution and Asset Enhancement Initiatives (AEIs) is a testament to their commitment to enhancing portfolio quality and shareholder value.

The hospitality sector could provide upside exposure in the near term

As CLAS continues to navigate the post-pandemic landscape, its diversified portfolio not only offers stability but also opens up avenues for growth and reconstitution. With the hospitality sector on an upward trajectory, CLAS is well-positioned to reap the benefits of accretive acquisitions and strategic divestments. However, this optimistic outlook is not without its challenges. A significant risk factor for CLAS lies in the unpredictability of leisure and corporate travel demand. Should this demand fall short of expectations, it could adversely affect occupancy rates and room pricing across CLAS’s properties. Such a scenario would directly impact the revenue streams and profitability of the trust, potentially offsetting some of the gains from its strategic manoeuvres.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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