Monday, January 29, 2024
CapitaLand Ascott Trust (CLAS) has reported a notable 16% year-on-year increase in its distribution per Stapled Security (DPS) for the fiscal year 2023, reaching 6.57 cents. Despite the challenges posed by the pandemic, CLAS has consistently elevated its DPS annually since fiscal year 2020. After excluding one-off items, the adjusted DPS for fiscal year 2023 surged by 14% year-on-year to 5.44 cents. The total distribution for the fiscal year experienced a robust 25% year-on-year growth, reaching S$237.0 million, attributed to enhanced operational performance and contributions from 18 recent acquisitions. In the second half of 2023, the DPS increased by 14% year-on-year to 3.80 cents, with CLAS’ total distribution for the same period growing by 24% year-on-year to S$140.8 million.
CLAS’ properties witnessed strong demand as international travel continued its recovery. In the second half of 2023, the revenue per available unit (REVPAU) reached 103% of pre-pandemic levels in the corresponding period of 2019, experiencing a pro forma year-on-year increase of 10% to S$157. The REVPAU also rose by 23% year-on-year to S$148 for the entire fiscal year 2023. In the fourth quarter of 2023, key markets such as China, Japan, the United States of America (USA), and Vietnam registered year-on-year REVPAU growth.
The gross profit for the second half of 2023 increased by 12% year-on-year to S$183.9 million, surpassing pre-pandemic levels by 106%. The revenue for the same period also recorded a 12% increase to S$397.6 million compared to the second half of 2022. This growth was primarily driven by higher revenue from CLAS’ existing portfolio and contributions from recent acquisitions. On a same-store basis, excluding the new acquisitions, gross profit and revenue increased by 5% and 8%, respectively, compared to the second half of 2022. Stable income sources contributed approximately 54% of CLAS’ gross profit in the second half of 2023, with the remaining 46% generated from growth income sources.
CLAS achieved a fair value gain of S$156 million, representing a 2% increase in portfolio valuation. This gain was attributed to the stronger operating performance and positive outlook for the portfolio, even considering higher capitalization rates and discount rates. Markets with notable valuation gains included Australia, Europe, Japan, Singapore, and the United Kingdom.
Mr Bob Tan, Chairman of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS), said: “CLAS continued to deliver strong performance. Our balanced portfolio of stable and growth income streams enables CLAS to capture growth opportunities while remaining resilient amidst uncertainties. As part of CLAS’ active portfolio reconstitution strategy, we completed 18 yield-accretive acquisitions in the past two years, boosting CLAS’ income. In the last seven months, we also announced the divestment of nine mature properties[4] at a premium to book value. Our strengthened financial position will enable us to redeploy capital towards more optimal uses such as investments into higher-yielding assets, funding our asset enhancement initiatives (AEI) or paring down debt. We remain committed to delivering sustainable returns to Stapled Securityholders.”
Ms Serena Teo, Chief Executive Officer of the Managers of CLAS, said: “Through our active portfolio reconstitution and AEI, we are enhancing the quality of our portfolio to create further value for Stapled Securityholders. We have eight properties undergoing or will undergo AEI. The AEI is expected to uplift the value of the properties post completion. Looking ahead, the diversification of CLAS’ portfolio across geographies, lodging asset classes and contract types will continue to provide income stability.”
Emphasizing its active portfolio reconstitution strategy, CLAS successfully divested assets totaling S$260.1 million at a premium to book value over the past seven months. The divestment of nine assets is expected to unlock S$24.3 million in net gains, at an average exit yield of about 4.3%. Apart from deploying capital to higher-yielding assets or asset enhancement initiatives (AEI), these divestments enhance CLAS’ financial flexibility, potentially strengthening its balance sheet and reducing gearing.
In November 2023, CLAS completed the yield-accretive acquisition of three prime lodging properties in London, Dublin, and Jakarta, delivering an EBITDA yield of 6.2%, approximately 1.9 percentage points higher than the average exit yield on its divestments. Additionally, in January 2024, CLAS concluded the turnkey acquisition of Teriha Ocean Stage, a 258-unit rental housing property in Fukuoka, Japan, with an estimated net operating income yield of about 4% on a stabilized basis.
CLAS is actively enhancing the value and profitability of its portfolio through new developments and AEI. Standard at Columbia, a student accommodation property in the USA, topped out in June 2023 and welcomed its first batch of students in August 2023. The construction of a new Somerset serviced residence at Clarke Quay in Singapore is slated for completion in the second half of 2025.
Moreover, CLAS has announced AEI for eight properties to create additional momentum beyond the travel recovery phase. The expected uplift in performance post-renovation is anticipated to enhance the profitability and valuation of these properties. In October 2023, Riverside Hotel Robertson Quay underwent a rebranding transformation and was revealed to the public as The Robertson House, a part of The Crest Collection. The AEI for this property is on track for full completion in the first quarter of 2024, while AEI for the remaining seven properties is scheduled to be completed between 2024 and 2026.
Maintaining a robust financial position, CLAS remains prudent in its capital management. Despite the prevailing high-interest rate environment, CLAS maintains a low average cost of debt at 2.4% per annum as of December 31, 2023. The proportion of debt on fixed rates has increased to 81%, and CLAS holds approximately S$1.32 billion in cash on hand and available credit facilities. With a healthy interest rate cover of 4 times, CLAS has a debt headroom of about S$2 billion and a gearing of 37.9%, well below the 50% gearing limit allowed by the Monetary Authority of Singapore under the property funds appendix.
In summary, CLAS’ financial results for the second half of 2023 and the entire fiscal year 2023 exhibit impressive growth in revenue, gross profit, and distribution. The company’s proactive approach to portfolio reconstitution, strategic acquisitions, and ongoing development and enhancement initiatives position it well for sustained success in the real estate market.
Wednesday, May 1, 2024
Wednesday, May 1, 2024
