CapitaLand Ascott’s Latest Earnings: Dividend Up Nearly 50%

February 2, 2023

Singapore REITs (S-REITs) have rebounded strongly this year amid slower anticipated US Federal Reserve (Fed) rate hikes and the reopening in China.

One of the REITs that we’ve highlighted as a key beneficiary of China’s reopening is CapitaLand Ascott Trust (SGX: HMN).

In fact, CapitaLand Ascott Trust, or CLAS for short, was one of the best performing S-REITs in 2022 with a total return of 6.7%.

This is not a surprise since the reopening of international borders globally benefitted CLAS, which is the largest lodging trust in Asia-Pacific with S$8.0 billion of total assets in 47 cities, across 15 different countries.

I have also shared 3 Reasons to Invest in CLAS earlier this year and its latest earnings signal the continuation of the REIT’s strong earnings momentum.

So, for dividend investors, here are five key highlights that investors need to know from CLAS’s latest earnings results.

1. Revenue and gross profit growth gain momentum

CLAS reported a 69% year-on-year (yoy) increase in its revenue to S$353.8 million and an 80% yoy increase in its gross profit to S$164.6 million during the second half of its fiscal year ended 31 December 2022 (H2 FY2022).

The growth momentum was faster than what we saw in H1 FY2022.

The strong growth was mainly attributed to the higher revenue from CLAS’s existing portfolio and contributions from its expanded portfolio of longer-stay assets.

These comprised of student accommodation and rental housing properties in the US and Japan, newly acquired service residences in Australia, France and Vietnam, as well as from lyf one-north Singapore, which soft-opened in Q4 2021.

Source: CapitaLand Ascott Trust H2 and FY2022 Financial Results Presentation

2. RevPAU in Q4 2022 reached pre-COVID levels

The strong operating performance of CLAS’s portfolio continues amid recovery of the international market.

In fact, revenue per available unit (RevPAU) during Q4 FY2022 rose 78% yoy to reach pre-pandemic levels of S$155.

All of CLAS’s key market segments continued their growth momentum and registered a quarter-on-quarter growth with the biggest improvements seen in Japan, Australia, and the US.

Source: CapitaLand Ascott Trust H2 and FY2022 Financial Results Presentation

3. Higher distribution to shareholders

In line with the strong portfolio performance, CLAS increased its distribution per stapled security (DPS) by 47% yoy to 3.33 cents for H2 FY2022.

This translates into an increase of 31% yoy for its full-year DPS for FY2022 to 5.67 cents.

Excluding the one-off items comprising of the divestment gain of S$25.0 million in H2 FY2021 and realised exchange gain in the H2 FY2022, adjusted DPS would have more than doubled in FY2022.

Source: CapitaLand Ascott Trust H2 and FY2022 Financial Results Presentation

4. Growth income contribution rose to 48% in H2 FY2022

The surge in demand for its properties is in line with the recovery in the hospitality sector post COVID-19.

In H2 FY2022, growth income contributions rose to 48% of the total gross profit as recovery picked up across various markets.

Bob Tan, Chairman of CapitaLand Ascott Trust Management Ltd and CapitaLand Ascott Business Trust Management Pte. Ltd, said this:

“CLAS’s robust performance is underpinned by our diversified and well-balanced portfolio. Growth income contribution increased to 48% in 2H 2022 as our properties saw an upswing in demand with the recovery in the hospitality sector post COVID-19, while our stable income streams offered resilience against downside risks.

To further enhance our stable income portfolio, CLAS invested S$420 million in 15 accretive acquisitions in FY 2022, predominantly in the longerstay segment. We remain committed to delivering sustainable returns to Stapled Securityholders.”

CLAS’s diversified portfolio with its mix of stable and growth income streams protects against the downside risk with resilient stable income.

This is achieved while also allowing it to be a proxy for the recovery of the hospitality sector.

Source: CapitaLand Ascott Trust H2 and FY2022 Financial Results Presentation

5. Strong financial position for CLAS

CLAS has a strong financial position with a net gearing of 38%, which is well below the 50% gearing limit allowed by the MAS.

Its proportion of debt on fixed rates increased to 78% as of 31 December 2022, up from 76% as of 30 September 2022. This will help to offset the impact of rising interest rates.

Aside from that, its effective borrowing cost remains low at around 1.8% while interest cover has also improved to 4.4 times as of 31 December 2022.

Well positioned for earnings growth

CLAS is in a good position to benefit from the recovery in travel, especially with the reopening of China’s international borders.

Aside from that, new developments in Singapore and the US, as well as its asset enhancement initiatives (AEIs) in four properties, will also boost value and the profitability of its portfolio.

In terms of valuation, CLAS is also trading at a rather attractive level with a 12-month forward dividend yield of 6.4%.

Disclaimer: ProsperUs Investment Coach 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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