Date of Report: September 30, 2024
Broker Name: CGS International Securities

Overview of CapitaLand Ascott Trust (CLAS)

CapitaLand Ascott Trust (CLAS) is covered under the hospitality sector, with a key focus on leveraging its diversified portfolio and strategic initiatives to maintain earnings resilience. As of the close on September 29, 2024, CLAS traded at S$0.97, with a target price of S$1.17, indicating a potential upside. The report classifies CLAS as an “ADD” recommendation, suggesting the stock’s total return is expected to exceed 10% over the next 12 months.

Financial Metrics and Valuation

• Price to Earnings (P/E) Ratio:
  • 2024F: 19.69x
  • 2025F: 20.62x
  • 2026F: 18.47x
• Price to Book Value (P/BV) Ratio:
  • 2024F: 0.85x
  • 2025F: 0.86x
  • 2026F: 0.87x
• Dividend Yield:
  • 2024F: 6.30%
  • 2025F: 6.41%
  • 2026F: 6.99%

CLAS offers an attractive dividend yield, forecasted to grow from 6.30% in 2024 to 6.99% by 2026, making it appealing for income-focused investors. The company’s P/E ratio suggests that it is trading at a relatively higher multiple compared to its peers, while the P/BV ratio reflects its potential for value appreciation over the forecast period.

Earnings Resilience and Strategic Expansion

CapitaLand Ascott Trust’s resilience is attributed to its diversified portfolio and strong debt funding sources. This combination allows the company to unlock value and grow inorganically through portfolio rebalancing strategies. The company is well-positioned to withstand economic fluctuations, thanks to its strategic efforts to ensure earnings stability.

Performance Amidst Market Conditions

The report notes that despite room supply growing by approximately 5% year-on-year, the company has performed well, particularly in the luxury and upscale hotel segments. CLAS managed to increase its revenue per available room (RevPAR) by 1.5% year-on-year, driven by a 1.9 percentage point improvement in occupancy rates.

Forward Outlook

In the broader hospitality sector, the report anticipates that CapitaLand Ascott Trust will continue to benefit from stable average daily rates (ADR) and strong international visitor arrivals (IVA) into Singapore. The recovery of international travel, particularly from China and Japan, has been a major contributor to this positive outlook.

Conclusion

CapitaLand Ascott Trust is expected to maintain its solid financial performance and capitalize on its diversified portfolio to deliver sustainable growth. The company’s strategic focus on portfolio rebalancing and value unlocking through inorganic growth initiatives positions it favorably in the Singaporean hospitality sector, especially as travel trends normalize post-pandemic.