UOB Kay Hian Private Limited
Date of Report: 18 June 2025
CapitaLand Ascendas REIT: Strategic Expansion in Singapore’s Data Centre and Business Space Market Drives Growth Prospects
Overview of CapitaLand Ascendas REIT (CLAR): Poised for Growth in Real Estate Investment
CapitaLand Ascendas REIT (CLAR) is a diversified Singapore-listed real estate investment trust with a robust portfolio valued at S\$16.8 billion as of December 2024. The REIT’s holdings span 229 properties across Singapore, Australia, Europe, the UK, and the US, covering business and science parks, life sciences, high-specification industrial, data centres, light industrial, and logistics & distribution assets.
- Share Price (as of report date): S\$2.64
- Target Price: S\$3.58 (35.6% upside)
- Market Capitalization: S\$12.15 billion
- Distribution Yield (2025F): 5.8%
- Net Asset Value per Share (2025F): S\$2.27
- Net Debt per Share (2025F): S\$1.51
- Major Shareholder: Temasek Holdings (19.6%)
Strategic Acquisitions: Expanding Data Centre and Business Space Footprints
CLAR has announced the acquisition of two key assets in Singapore for a total of S\$700 million, marking a significant step in its strategy to strengthen its data centre and premium business space portfolio:
- 9 Tai Seng Drive (9TSD): A Tier III colocation data centre
- 5 Science Park Drive (5SPD): A premium business space property in the Geneo life science and innovation cluster, fully leased to Shopee (Sea Limited’s e-commerce arm)
9 Tai Seng Drive (9TSD): High-Yield, Supply-Constrained Data Centre
- Type: Tier III colocation data centre
- Power & Cooling Redundancy: Expected uptime of 99.982% per year, power usage effectiveness of 1.4
- Lease Profile: Fully leased to leading end-users in social media, e-commerce, and financial services
- WALE: 4.4 years
- Rental Escalations: 2.0%–3.5% annually
- Land Tenure: 30 years remaining (expiring 31 May 2055)
- Agreed Value: S\$455.2 million (2.2% discount to independent valuation)
- Initial NPI Yield: 7.2% (7.1% post-transaction costs)
- Gross Floor Area: 20,307 sqm; Net Lettable Area: 6,968 sqm
- Occupancy: 100%
The Singapore data centre market stands out for its tight supply, with a vacancy rate of just 2%. Notably, 9TSD is currently 30% under-rented compared to the prevailing market rent of S\$390–520 per kW, presenting significant uplift potential upon renewal. The asset also offers enhancement opportunities by securing higher power capacity and converting unutilized space into additional data centre halls.
5 Science Park Drive (5SPD): Premium Business Space Anchored by Shopee
- Location: Geneo life science and innovation cluster, connected to Kent Ridge MRT
- Tenant: Shopee (Sea Limited)
- Land Tenure: 56 years remaining
- Agreed Value: S\$245 million (includes S\$30 million deferred consideration, 7.0% discount to independent valuation)
- Initial NPI Yield: 6.1% (5.7% post-transaction costs, or 5.0% including deferred consideration)
- Gross Floor Area: 25,534 sqm; Net Lettable Area: 22,488 sqm
- Occupancy: 100%
- WALE: 1.5 years
This acquisition expands CLAR’s Singapore assets under management (AUM) by 6.6% to S\$11.7 billion, raising the Singapore portfolio’s weight to 67% of total valuation. Data centres’ AUM will increase by 32.8% to S\$1.9 billion, with Singapore-based data centres making up 54%.
Financial Impact: DPU Accretion and Portfolio Strengthening
- DPU Accretion: The acquisitions are accretive to pro forma 2024 DPU by 0.206 S cents (1.4%), excluding deferred consideration. With a 15% rental reversion at Shopee’s lease renewal in end-2026 (and deferred consideration paid), DPU accretion could reach 1.6%.
- NAV Growth: NAV per unit could rise 3.5% to S\$2.35.
- Leverage: Aggregate leverage is expected to dip by 0.5 ppt to 38.4%.
- Standalone DPU Impact: 9TSD alone improves pro forma 2024 DPU by 1.24%; 5SPD by 0.14% (0.25% with rental reversion and deferred payment).
- Funding Structure: 70% equity (S\$500m from private placement of 202.4m new units at S\$2.47 each), 30% debt (S\$200m bank loan at 3.0%).
Table: Key Financials (S\$ million unless stated)
| Year to 31 Dec |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
1,480 |
1,523 |
1,587 |
1,704 |
1,745 |
| EBITDA |
920 |
951 |
976 |
1,053 |
1,081 |
| Net Profit (Adj.) |
671 |
698 |
663 |
729 |
751 |
| EPU (S cent) |
15.5 |
15.9 |
14.7 |
15.8 |
16.3 |
| DPU (S cent) |
15.2 |
15.2 |
15.4 |
16.5 |
16.9 |
| DPU Yield (%) |
5.7 |
5.8 |
5.8 |
6.2 |
6.4 |
| Net Margin (%) |
11.3 |
47.2 |
41.8 |
42.8 |
43.1 |
| Net Debt/Equity (%) |
62.2 |
61.7 |
64.6 |
65.7 |
66.8 |
| Interest Cover (x) |
3.6 |
3.5 |
3.4 |
3.6 |
3.6 |
| ROE (%) |
1.6 |
7.0 |
6.3 |
6.8 |
7.0 |
Portfolio Development and Redevelopment Initiatives: Building for the Future
CLAR is intensifying its focus on both development and redevelopment, with five projects totaling S\$775 million, scheduled for completion between Q1 2025 and Q1 2028:
- Summerville Logistics Center (South Carolina, US): New logistics property (NLA: 548,862 sf), scheduled for completion in Q4 2025.
- Geneo @ 1 Science Park Drive (34% stake): Life science and innovation campus, 71% pre-committed, 19% in advanced negotiations; completed March 2025.
- 27 IBP: Redevelopment to maximize plot ratio, increase GFA to 265,233 sf, with modern amenities; completion in Q1 2026. Connectivity to improve with Jurong Region Line in 2028.
- 5 Toh Guan Road East: Conversion to a modern six-storey ramp-up logistics warehouse, suitable for 3PL and last-mile delivery, completion by Q4 2025.
- LogisHub @ Clementi: Transformation into a seven-storey ramp-up logistics facility, increasing GFA by 122% to 633,133 sf; completion by Q1 2028.
These initiatives are expected to drive a robust 7% DPU growth in 2026, reflecting increased contributions from development and redevelopment projects.
Earnings Revision and Valuation
- DPU Forecast Upgraded: Revised upward by 0.9% for 2025 (six-month contributions) and 1.7% for 2026 (full-year contributions) following the acquisitions.
- Valuation Method: Target price of S\$3.58 based on Dividend Discount Model (cost of equity: 7.0%, terminal growth: 2.5%).
Operational Metrics: Performance at a Glance
| Metric |
1Q24 |
2Q24 |
3Q24 |
4Q24 |
1Q25 |
| DPU (S cents) |
n.a. |
7.52 |
n.a. |
7.68 |
n.a. |
| Occupancy |
93.3% |
93.1% |
92.1% |
92.8% |
91.5% |
| Aggregate Leverage |
38.3% |
37.8% |
38.9% |
37.7% |
38.9% |
| Average Cost of Debt |
3.8% |
3.7% |
3.7% |
3.7% |
3.6% |
| % Borrowing in Fixed Rates |
82.6% |
83.0% |
80.2% |
82.7% |
73.6% |
| WALE by NLA (years) |
3.9 |
3.8 |
3.7 |
3.7 |
3.6 |
| Weighted Debt Maturity (years) |
3.4 |
3.7 |
3.3 |
3.5 |
3.1 |
| Rental Reversion |
16.9% |
13.4% |
14.4% |
11.6% |
11.0% |
Investment Outlook: Key Growth Catalysts
- Resilient growth across business parks, hi-tech buildings, life sciences, logistics, and data centre segments
- Incremental contributions from ongoing and future development, redevelopment, and asset enhancement initiatives
- Tight supply and high demand in Singapore’s data centre market provide strong rental uplift opportunities
- Portfolio enhancements and a disciplined funding strategy support sustainable distribution growth
Conclusion: Buy Recommendation Maintained
CLAR stands out as a leading REIT in Singapore’s dynamic real estate market, underpinned by strategic acquisitions in data centres and premium business spaces, robust development pipelines, and prudent financial management. With accretive deals, attractive yields, and a clear path to growth, the REIT remains well-positioned to deliver value to its unitholders. The recommendation is to maintain a BUY, with a target price of S\$3.58.
