CGS International

April 28, 2025

CapitaLand Ascott Trust: 1Q25 Performance and Future Outlook

CapitaLand Ascott Trust (CLAS) reported a 1Q25 gross profit increase of 4% year-over-year, driven by acquisitions and a rise in portfolio RevPAU. The portfolio RevPAU grew by 4% year-over-year, and management anticipates maintaining mid-single-digit RevPAU growth throughout FY25. The analysis maintains an Add rating with an unchanged target price of S\$1.13.

1Q25 Financial Performance

• Gross Profit Growth: A 4% year-over-year increase was primarily driven by occupancy-led growth and strategic acquisitions.
• Acquisition Impact: Contributions from Lyf Funan, ibis Ginza, and Chisun Kanazawa fully offset the impact of divestments during the quarter.
• Same-Store Performance: Gross profit edged up by 1% on a same-store basis.
• Outlook: Management expects mid-single-digit reversion to continue through FY25.
• Travel Trends: Anticipated shifts in travel demand include increased domestic and short-haul international travel due to macro uncertainties.
• Singapore Portfolio: RevPAU for the Singapore portfolio decreased by 3% year-over-year on a like-for-like basis, cushioned by stronger performance in long-stay serviced residences and the Robertson House post-AEI.
• Corporate Travel: Corporate travel demand is expected to remain subdued, with transient demand picking up during concerts and events in Singapore.
• Lease Renewals: Negotiations for master lease renewals in Japan and Australia, due in 2H25, are progressing as planned.

Segment Performance

• MCMGI Portfolio: The Management Contracts with Minimum Guaranteed Income (MCMGI) portfolio saw a gross profit increase of 12% year-over-year.
• Longer-Stay MC Portfolio: This segment also performed strongly, with a 10% year-over-year increase in gross profit, driven by the UK and Belgium portfolios, as well as student accommodation assets in the US.
• UK Portfolio: RevPAU growth in the UK was mainly supported by Citadines Holborn-Covent Garden London, which experienced higher ADR post-AEI (over 20% vs. 1Q23).
• US Student Housing: Student housing assets in the US are expected to remain resilient despite macro uncertainties, catering primarily to domestic students.
• Hospitality MC Assets: Gross profit from hospitality MC assets decreased by 4% year-over-year due to divestments and higher expenses offsetting revenue increases.
• Master Lease (ML): ML saw a 5% year-over-year increase in gross profit, driven by the acquisition of Lyf Funan in December 2024. However, on a same-store basis, gross profit was 5% lower due to falling variable rent and higher expenses.

Balance Sheet and Financial Strategy

• Gearing: Gearing was higher at 39.9% in 1Q25, following the completion of acquisitions.
• Cost of Borrowing: The cost of borrowing decreased by 10bp to 2.9% in 1Q25 and is expected to remain around this level for FY25.
• Divestment: The divestment of Somerset Tianjin was completed in April 2025, with proceeds intended to reduce borrowings.
• Investment Strategy: Management prefers to grow stable income (70% of gross profit in 1Q25) from master lease or longer-stay assets, including student or rental housing in Australia, Japan, UK, and US.

Recommendation

• Rating: Reiterate Add rating.
• Target Price: Maintain DDM-based TP at S\$1.13.
• Caution: Management is cautious of potentially higher expenses due to ongoing tariff disputes.
• Catalysts: Faster-than-expected completion of AEI projects.
• Risks: Unfavorable exchange rates and unexpected slowdown in global travel demand.

Key Statistics

• Current Price: S\$0.855
• Target Price: S\$1.13
• Up/Downside: 32.2%

Major Shareholders

• CapitaLand: 24.7%
• The Ascott: 15.4%
• Vanguard Group: 1.3%

Analyst(s)

• LOCK Mun Yee
• LI Jialin

Financial Summary

ESG Highlights

ESG Combined Score by LSEG: B+

• CLAS’s sustainability strategy is aligned with CapitaLand’s.
• Ranked best-in-class within its peer group and second in Singapore.
• Named “Global Sector Leader – Listed Hotel” in the 2023 GRESB Real Estate Assessment for the third consecutive year.
• Retained top spot in the REITs and Business Trusts category of the Singapore Governance and Transparency Index 2023 for the third year running.

Key ESG Implications

• CapitaLand aims to build a green global operational portfolio by 2030.
• CLAS’s goal is to obtain green certificates for all its properties by 2030; as of 31 May 2024, 51% of CLAS’s portfolio was green-certified (FY23: 47%).
• Success in achieving this goal would position CLAS at the forefront of ESG.

ESG Highlights and Implications

• CLAS was ranked 14 out of 101 companies in Singapore, and 3 out of the 26 REITs in Singapore, according to LSEG.
• A Sustainability Committee has been formalized, comprising the CEO and Heads of Department of CLAS’s Managers, and the Heads of Department of the operations and technical teams of its Sponsor.
• In FY23, CLAS reduced water, energy, and carbon emissions intensities by 7.8%, 8.5%, and 0.7%, respectively, compared to the 2019 baseline.
• Sustainable financing accounts for S\$551.2m, or c.17%, of CLAS’s borrowings in FY23.

Trends and Implications

• CapitaLand Group raised its Scopes 1 and 2 carbon emissions reduction targets in 2022, validated by the Science-Based Targets initiative (SBTi).
• CLAS is committed to reducing its absolute Scopes 1 and 2 emissions by 46% by 2030 from a 2019 base year and aims to achieve net zero by 2050.
• Continuous ESG efforts will attract investor interest and boost operational and financial performance in the long term.

Financial Data

Profit & Loss (S\$m)

Cash Flow (S\$m)

Balance Sheet (S\$m)

Key Ratios

Key Drivers