Broker: Maybank Research Pte Ltd
Date of Report: July 30, 2025

CapitaLand Ascott Trust: Robust Performance and Strategic Growth Drive 2025 Outlook

Overview: Consistent Performance and Strategic Focus

CapitaLand Ascott Trust (CLAS SP) continues to demonstrate stable performance, underpinned by portfolio reconstitution, rising occupancy, and effective margin management. In the first half of 2025, the trust reported a core distribution per unit (DPU) of SGD2.53 cents, a marginal decline of 0.8% year-on-year, while the core DPU excluding non-periodic items stood at SGD2.40 cents, down just 0.4% year-on-year. The REIT remains focused on asset enhancements and portfolio reconstitution, with management reiterating guidance for stable core distribution.

Key Highlights: Financial and Operational Results

• Revenue and Gross Profit Growth: 1H 2025 revenue reached SGD398.5 million, up 3.1% YoY, and gross profit increased by 5.6% YoY to SGD182.5 million. The improvement was driven by ongoing portfolio reconstitution, asset enhancements, and operational strength, partially offset by the absence of one-off income and regional FX headwinds.
• Same-Store Performance: On a same-store basis, gross profit grew 4% YoY, with RevPAU (Revenue per Available Unit) up 3.4% YoY to SGD150, largely due to higher occupancy (1H 77.5% vs. 74.0% in the prior year).
• Gross Profit Margin: Group margin improved by 1.1 percentage points YoY to 45.8%.

Financial Table: 1HFY25 Results at a Glance

Portfolio Reconstitution and Asset Enhancement Initiatives (AEIs)

• Gearing and Debt: Gearing stood at 39.6%, slightly down from the previous quarter’s 39.9%. The all-in cost of debt remains low and unchanged at 2.9%, with management guiding for stable debt costs.
• Perpetual Securities: CLAS issued SGD260 million of perpetual securities in May, redeeming SGD250 million of previous perps to manage working capital and fund asset enhancements.
• Active AEIs: Three new AEIs were announced, adding to ongoing projects in London and Sydney. The new AEIs represent a SGD145 million investment, accounting for 4.4% of current debt. Timelines for these AEIs remain fluid.

Valuation and Estimates: Positive Revisions and Target Price Increase

• DPU Guidance: DPU for FY25 and FY26 has been raised by approximately 2%, reflecting recent operational trends and management’s guidance for stable core DPU.
• Target Price: The target price (TP) is increased to SGD1.05 (from SGD1.00), representing a 20% upside from the current share price of SGD0.91.
• Valuation Methodology: The trust is valued using a two-stage Dividend Discount Model (DDM) and a cost of equity of 6.9% (down from 7.2%).

Shareholder Structure and Market Performance

• Major Shareholders: Temasek Holdings (31.3%), The Vanguard Group (2.2%), and BlackRock Fund Advisors (1.0%).
• Market Capitalization: SGD3.4 billion (USD2.7 billion), with 3,759 million issued shares.
• 52-Week High/Low: SGD0.98 / SGD0.79.
• Dividend Yield: 6.7% (FY25E-FY27E).

Detailed Financial Projections (SGD million unless stated)

Business Model, Strategic Strengths, and ESG Initiatives

• Global Sponsor: Ascott’s global reach (160,000 units) and operational expertise underpin CLAS’s growth and stability.
• Portfolio Expansion: The portfolio has grown nine-fold since IPO in 2006, now comprising 19,000 serviced residences, hotels, rental housing, and student accommodation units, largely in gateway cities.
• Resilient Revenue Streams: Master leases and management contracts with minimum guaranteed income (MCMGI) contributed 30% and 40% of 1H23 revenue and gross profit, respectively.
• ESG Leadership: 35% of the portfolio is green-certified. CLAS achieved a 40% reduction in carbon emissions intensity since FY08 and has pioneered green loans and sustainability-linked bonds in the sector. 100% of energy procured in Belgium, Germany, and the UK is from renewable sources.
• Governance Excellence: Board independence is high, with 4 of 7 members, including the Chairman, being independent. The management fee structure aligns with peers, and payout ratios consistently exceed the 90% minimum for tax transparency.

Key Growth Drivers and Risks

Growth Drivers

• Increased corporate and leisure demand boosting RevPAU.
• Operating leverage and efficiency gains post-pandemic.
• Accretive acquisitions from sponsors and third parties.

Risks

• Slower recovery from corporates, Chinese tourists, and international students.
• Unfavorable master lease renewals or lower margins.
• Significant FX volatility and higher-than-expected borrowing costs.
• Potential declines in asset values leading to higher leverage.

Asset Recycling and Capital Management

• CLAS has successfully recycled assets, divesting at ~2% exit yield and reinvesting at ~5% EBITDA yield, unlocking SGD225 million in gains from FY20-21.
• The merger with Ascendas Hospitality Trust in 2019 expanded AUM to SGD7.4 billion and improved liquidity via inclusion in the FTSE EPRA Nareit Global Real Estate Index.

ESG and Social Impact Initiatives

• During the pandemic, CLAS properties supported returning nationals, workers, and healthcare professionals.
• Staff training averaged 40 hours per employee in FY21, with strong gender diversity (52% female overall, 75% at management level).
• Employees actively participate in charitable initiatives organized by CapitaLand Hope Foundation.

Conclusion: Investment Thesis and Outlook

CLAS remains a compelling choice for investors seeking stability and growth in the hospitality REIT sector. Its diversified, resilient portfolio, disciplined capital management, and proactive ESG strategy support its robust risk-adjusted returns. With stable core DPU guidance, ongoing AEIs, and strong sponsor backing, CLAS is well-positioned for continued outperformance. The raised target price of SGD1.05 underscores Maybank’s bullish stance on the trust, supported by a 20% upside from current levels.

Historical Recommendations and Target Price Trends

• Consistent Buy ratings with target prices ranging from SGD1.0 to SGD1.4 in the last three years, reflecting sustained confidence in the trust’s fundamentals and outlook.