Date: October 27, 2024
Broker: Maybank Research Pte Ltd

Company Overview

CapitaLand Ascendas Real Estate Investment Trust (CLAR) is the second largest listed S-REIT and the first and largest listed REIT within the industrial sub-sector in Singapore. It is backed by the sponsor Ascendas-Singbridge, acquired by CapitaLand Investment in July 2019, and currently boasts SGD124 billion in assets under management (AUM).

Financial Performance

• Share Price: SGD 2.75
• 12-Month Price Target: SGD 3.10 (+18%)
• Market Capitalization: SGD 12.1 billion (USD 9.1 billion)
• Occupancy Rate: 92.1%, with stability in Singapore and Europe/UK, while a slight decrease was noted in the US and Australia.

Recent Business Updates

• The 3Q24 business update indicated stable operations and financial metrics.
• Rent Reversion: Mid-teens reversion of +14.4% in 3Q24, primarily driven by logistics.
• Management reiterated a full-year guidance of high single-digit positive rent reversion.

Portfolio Insights

• Property Divestment: Recently divested a ramp-up warehouse with an ancillary office block for SGD 112.8 million, which is a 67% premium to book value.
• The property, fully occupied as of June 2024, is being acquired by GDS, a data center operator, reflecting the asset’s valuable attributes.
• The diversified revenue profile is expected to stabilize the bottom line amidst fluctuations in occupancy.

Key Financial Metrics (in SGD million)

• Revenue:
  • FY22A: 1,353
  • FY23A: 1,480
  • FY24E: 1,514
• Net Property Income:
  • FY22A: 969
  • FY23A: 1,023
  • FY24E: 1,049
• Core Net Profit:
  • FY22A: 484
  • FY23A: 506
  • FY24E: 648
• DPU (Distribution Per Unit):
  • FY22A: 15.8 cents
  • FY23A: 15.2 cents
  • FY24E: 14.7 cents

Risks and Considerations

• Potential risks include non-renewal of leases in the US and UK, a higher interest rate environment, and lower valuations of overseas properties.
• There may be structural vacancy issues in business parks and higher capital expenditures for older data centers.

Value Proposition

CapitaLand Ascendas REIT is recognized for its strong credit, diversified revenue, and proactive capital recycling strategies, which are anticipated to stabilize its financial performance in a fluctuating market environment.