CapitaLand Ascendas REIT Review @ 12 February 2023

Basic Profile & Key Statistics

• Main Sector(s): Office, Industrial & Logistics
• Country(s) with Assets: Singapore, United States, Australia, England, Netherlands, France, Switzerland
• No. of Properties (exclude development/associate/fund): 227

Key Indicators

Performance Highlight

Gross revenue, NPI, the amount available for distribution and DPU have improved yoy mainly due to contributions from the completion of Ubix, Singapore in Jan 2022, the acquisition 11 logistics properties in Kansas City, US, in Nov 2021, the acquisition of 500 Green Road, Brisbane, Australia, and 7 Kiora Crescent, Sydney, Australia, in Feb 2022, and the acquisition of 7 logistics properties in Chicago, US, in Jun 2022. 

Rental Reversion

The rental reversion for 3Q and 4Q is at 5.4% and 8% respectively. For FY2022, the rental reversion is at 8%. This positive rental reversion is mainly contributed by logistics properties in U.S.

Completed Acquisition/Developments/AEI

In 2H 2022, CLAR completed the AEI for 17 Changi Business Park Central 1. In 1Q 2023, CLAR acquired 622 Toa Payoh Lorong 1 and 1 Buroh Lane.

On-Going Development & AEI

Development completion for MQX4 has been delayed from 4Q 2022 to 2Q 2023. As for redevelopments, 1 Science Park Drive and iQuest are expected to complete by 2Q 2025 and 2Q 2026 respectively, which iQuest@IBP completion has delayed from 4Q 2024. Both the AEI of The Alpha and the Convert-to-Suit for 6055 Lusk Boulevard are expected to complete by 4Q 2023.

Sensitivity to Interest Rate

For every 1% increase in interest rate, the DPU impact would be 0.31 cents per annum, around 2%.

Distribution Breakdown

• Distributable Income Breakdown:
• 96.4% from Operation
• 2.5% from Fees Payable/Paid in Units
• 1.1% from Income Support
• Distribution = 100% of Distributable Income
• Distribution to Perpetual Securities Holder = 1.4% of Distributable Income

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median for more than 20%
• REIT Manager's Shareholding: Below median for more than 20%
• Directors of REIT Manager's Shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: ± 10% from median
• Highest Lease Expiry within 5 Years: Below median for more than 10%; Falls in this year
• Weighted Average Land Lease Expiry: Below median for more than 10%

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing ratio including perps: ± 10% from median
• Cost of Debt: Below median for more than 10%
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: ± 10% from median
• WADM: Above median for more than 20% 
• Highest Debt Maturity within 5 Years: Below median for more than 20%; Falls in 2024
• Interest Coverage Ratio: Above median for more than 20%

Diversification Profile

• Top Geographical Contribution: Above median for more than 10%
• Top Property Contribution: Below median for more than 20%
• Top 5 Properties' Contribution: Below median for more than 20%
• Top Tenant Contribution: Below median for more than 20%
• Top 10 Tenants' Contribution: Below median for more than 20%

Key Financial Metrics

• Property Yield: Above median for more than 10%
• Management Fees over Distribution: ± 20% from median; $7.87 distribution for every dollar paid 
• Distribution on Capital: Above median for more than 10%
• Distribution Margin: ± 10% from median

Trends

• Uptrend: NAV per Unit
• Slight Uptrend: Occupancy
• Flat: DPU, Interest Coverage Ratio
• Slight Downtrend: Property Yield, Distribution Margin
• Downtrend: Distribution on Capital

Relative Valuation

• P/NAV: Average for 1y; & 3y; Below -1SD for 3y & 5y
• Dividend Yield: Above average for 1y & 5y; Above +1SD for 3y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
Well Spread Lease Expiry	Low REIT Manager's Shareholding
Low Cost of Debt	Low Directors of REIT Manager's Shareholding
Long WADM	High Top Geographical Contribution
Well Spread Debt Maturity	Distribution on Capital Downtrend
High Interest Coverage Ratio
Low Top Property & Top 5 Properties' Contributions
Low Top Tenant & Top 10 Tenants' Contributions
High Property Yield
Competitive Management Fees
High Distribution on Capital
NAV per Unit Uptrend

Despite the increase in utilities and finance costs, CLAR continues to deliver good results, with improving DPU and positive rental reversions. Moving forward, with the recent acquisitions and upcoming completion of the MQX4 development, CLAR is expected to maintain its strong performance.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.