CapitaLand Ascott Trust (CLAS): Robust Portfolio Reconstitution, Financial Strength, and Positive Outlook for 2026

Summary of Key Points

• CLAS continues to deliver stable returns, underpinned by proactive asset management, strategic divestments and acquisitions, and disciplined capital management.
• Portfolio gross profit for 3Q 2025 increased year-on-year, driven by operating improvements, accretive investments, and asset enhancement initiatives (AEIs), despite foreign currency headwinds.
• Significant divestments at premiums to book value and re-investments into higher-yielding assets have strengthened the Trust’s income resilience.
• Debt metrics remain healthy, with gearing expected to decline further following recent divestments and debt repayments, supporting greater financial flexibility and lower interest costs.
• CLAS maintains a strong liquidity position and is well-hedged against foreign currency and interest rate risks.
• Asset enhancement and development projects in prime locations are expected to uplift portfolio values and future distribution income.
• CLAS has won multiple sustainability accolades and continues to align with CapitaLand Investment’s 2030 Sustainability Master Plan.

Detailed Report: Developments That May Affect Shareholder Value

Financial Performance and Portfolio Updates

CLAS reported a 1% year-on-year increase in gross profit for 3Q 2025, with a 4% increase for 9M 2025. On a same-store basis (excluding acquisitions/divestments), gross profit declined slightly due to a one-off land tax adjustment in Australia, but otherwise would have been stable or higher. The Trust’s portfolio restructuring has helped mitigate currency depreciation against the SGD.

RevPAU (Revenue per Available Unit) grew 3% year-on-year to S\$163 in 3Q 2025, supported by higher average occupancy (83% vs 79%). Notable performance drivers included sports events in Australia, strong inbound tourism in Japan, post-renovation gains in the UK, and robust corporate/group bookings across markets.

Stable income sources comprise 69% of gross profit (from master leases, minimum guaranteed contracts, and living sector assets), supporting resilience against market volatility. The living sector, including rental housing and student accommodation, contributed 14% of 3Q 2025 gross profit, with average lease terms of two years and high occupancy rates (c.97% in Japan).

Strategic Divestments and Accretive Acquisitions

CLAS completed over S\$800 million in divestments at up to 100% premium to book value. Notable recent divestments include Citadines Central Shinjuku Tokyo at a 100% book premium, unlocking a net gain after tax of JPY5.7 billion (S\$50.8 million). These proceeds are being redeployed into higher-yielding assets, AEIs, and repayment of higher-interest debt.

Acquisitions totalled about S\$560 million in quality assets at higher yields. In August 2025, three Japan rental housing properties were acquired at a 4% expected NOI entry yield, funded by divestment proceeds and JPY-denominated debt. The distributable income from these properties is projected to more than replace the income lost from divestments, thus strengthening the income base and portfolio resilience.

Important for shareholders: The successful recycling of capital into higher-yielding assets and the premium achieved on divestments are likely to be viewed positively by the market, supporting distribution income and potentially re-rating the Trust’s valuation.

Asset Enhancement & Development Initiatives

CLAS has completed 8 AEI projects since 2024, with 4 major AEIs ongoing, totalling approximately S\$285 million in capex (of which CLAS will invest c.S\$210 million). These include major upgrades at The Cavendish London and Sydney Central Hotel (2026-2027), and the redevelopment of Somerset Liang Court Singapore, expected to open in 2027.

Such initiatives are targeted at uplifting property values, operational performance, and future distribution income. CLAS remains flexible and may adjust AEI schedules in response to macroeconomic conditions and renovation costs.

Shareholder impact: Successful AEIs and developments in prime locations are likely to drive future NAV growth and support distribution stability and growth.

Capital & Risk Management

CLAS’ gearing was 39.3% as at 30 Sep 2025, with substantial debt headroom of S\$1.8 billion and strong interest cover (3.1x). Post-divestment of Citadines Central Shinjuku Tokyo, gearing is expected to decrease further to c.37.2% as debt is repaid in 2Q 2026. Effective borrowing cost stands at a low 2.9% per annum, and about 78% of debt is on fixed rates.

Total available funds are c.S\$1.5 billion, comprising cash and committed credit facilities. The Trust is well-protected against foreign exchange and interest rate volatility, with 49% of assets hedged and a diversified currency mix.

Shareholder impact: Improved gearing, strong liquidity, and prudent risk management enhance CLAS’ ability to weather macroeconomic uncertainties, supporting distribution stability and reducing refinancing risk.

Resilience Amid Macroeconomic Uncertainties

CLAS benefits from diversification across geographies, asset classes, and contract types. Its predominantly long-stay lodging assets (average length of stay ~2 months), stable income sources, and mid-tier focus provide resilience against volatility in travel demand, tariffs, and inflationary pressures. Cost structures are leaner than full-service hotels, and many costs are borne by lessees or tenants.

CLAS has flexibility to adjust room rates, defer non-essential capex, and leverage natural hedges in currency exposures.

Shareholder impact: The Trust’s business model and risk management strategies are designed to limit downside risk and support long-term value, even as market conditions fluctuate.

Sustainability and Awards

CLAS remains committed to sustainability, with c.S\$830 million in sustainable financing and 68% of its GFA green certified (targeting 100% by 2030). It has received multiple accolades, including ‘Industry Mover’ in the S&P Global Sustainability Yearbook 2025 and Global Listed Sector Leader in GRESB for five consecutive years. The Trust is on track for 2030 reduction targets in carbon emissions, energy, and water consumption.

Such achievements enhance CLAS’ market position and appeal to ESG-focused investors, potentially supporting share value.

Outlook and Guidance

• CLAS expects to maintain its disciplined capital management and strong financial position, supporting further growth and stable distributions.
• Future returns will be driven by asset enhancement, development projects, and proactive portfolio reconstitution.
• Stable income sources and diversification remain key strengths, cushioning against macroeconomic shocks.
• Management remains cautiously optimistic, with plans to distribute non-periodic and/or divestment gains where appropriate.

Conclusion: Potential Price-Sensitive Information

The premium divestments, accretive acquisitions, ongoing AEIs in prime locations, and anticipated gearing reduction are all material developments that could affect share value. The Trust’s ability to recycle capital and enhance income resilience, combined with strong liquidity and risk management, position it well for further growth and distribution stability. Investors should monitor the outcomes of AEIs, future acquisitions/divestments, and distribution guidance for additional catalysts.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell securities. Investors should conduct their own research and consult professional advisors before making investment decisions. Past performance is not indicative of future results. The information presented is based on a review of CLAS’ investor presentation and may be subject to change or interpretation.

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