CapitaLand Ascendas REIT Review @ 13 August 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 and NPI improved YoY mainly due to the acquisition between Feb 2022 to May 2023. However, the amount available for distribution and DPU have declined slightly YoY due to higher borrowing costs.

Rental Reversion

Rental reversion is positive for both 1Q and 2Q. The average 1H rental reversion is at 14.2%.

Acquisition/Divestment

In 1H 2023, CLAR completed 3 acquisitions amounting to S$ 514.9 million and divested KA Place at S$ 35.4 million.

Asset Enhancement Initiative/Development

Development completion for MQX4 has been further delayed from initially 4Q 2022 to 2Q 2023, and now to 2H 2023. As for redevelopments, 1 Science Park Drive and 27IBP (previously iQuest) are expected to complete by 2Q 2025 and 1Q 2026 respectively. There is a new redevelopment project at 5 Toh Guan Road East which is expected to be completed by 4Q 2025. Both the AEI of The Alpha and the Convert-to-Suit for 6055 Lusk Boulevard are expected to complete by 4Q 2023.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median by 20% or more
• REIT Manager's Shareholding: Below median by 20% or more
• Directors of REIT Manager's Shareholding: Below median by 20% or more

Lease Profile

• Committed Occupancy: ± 5% from median
• WALE: ± 10% from median
• Highest Lease Expiry within 5 Years: Below median by 10% or more; Falls in 2025
• Weighted Average Land Lease Expiry: Below median by 10% or more

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing Ratio including Perps: ± 10% from median
• Cost of Debt: Below median by 10% or more
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: ± 10% from median
• WADM: Above median by 10% or more
• Highest Debt Maturity within 5 Years: Below median by 20% or more; Falls in 2027
• Interest Coverage Ratio: Above median by 20% or more

Diversification Profile

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

Key Financial Metrics

• Property Yield: Above median by 10% or more
• Management Fees over Operating Distributable Income: Below median by 5% or more; $7.41 distribution for every dollar paid 
• Operating Distributable Income on Capital: Above median by 10% or more
• Operating Distributable Income Margin: ± 10% from median
• Operating Distribution Proportion: Above median by 5% or more

DPU Breakdown

• TTM DPU Breakdown:
• 96.2% from Operation
• 2.6% from Management Fees Paid in Units
• 1.2% from Income Support

Trends

• Slight Uptrend: Property Yield
• Flat: Committed Occupancy, Operating Distributable Income on Capital, Operating Distributable Income Margin
• Downtrend: DPU from Operation, NAV per Unit, Interest Coverage Ratio

Relative Valuation

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

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	Operating Distributable Income on Capital Downtrend
High Interest Coverage Ratio	Operating Distributable Income Margin Downtrend
Low Top Property & Top 5 Properties' Contributions
Low Top Tenant & Top 10 Tenants' Contributions
High Property Yield
Competitive Management Fees
High Operating Distributable Income on Capital
High Operating Distribution Proportion
NAV per Unit Uptrend
Committed Occupancy Uptrend

Compared to the previous half-year, there have been improvements in gross revenue and NPI. However, DPU has declined mainly due to a decrease in tax-exempt income and distribution from capital, though no specific details were provided. In terms of debt, 13% of it needs to be refinanced this year. With the fixed rate debt accounts for 81.5%, the increase in interest expenses is expected to be low. Nevertheless, the performance of CLAR is expected to benefit from positive rental reversion and the full half-yearly contribution from the 3 newly acquired properties.

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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.