On 30 July 2024, CapitaLand Ascendas Real Estate Investment Trust (“CLAR”) have announced their half year result for FY2024. There were no significant changes this quarter, though the price to book ratio became a bit more premium with the nice rebound in share price since the previous article. This is to be expected, as market sentiments have improved significantly from the previous quarter. Take note however that while the financial performance of CLAR will improve in a lowered interest rate environment, there remains uncertainty on the possible market reactions when the interest rate cuts begin.
Website: Financial Statements And Related Announcement::Half Yearly Results
CLAR is Singapore’s first and largest listed business space and industrial Real Estate Investment Trust (“REIT”). It was listed on the Singapore Exchange Securities Trading Limited (SGX-ST) in November 2002.
It has since grown to be a global REIT anchored in Singapore, with a strong focus on tech and logistics properties in developed markets. It owns properties across three key segments, namely, 1) Business Space and Life Sciences, 2) Logistics, and 3) Industrial and Data Centres in the developed markets of Singapore, Australia, the United States and the United Kingdom/Europe.
CapitaLand Ascendas REIT is listed on several indices. These include the FTSE Straits Times Index, the Morgan Stanley Capital International, Inc (MSCI) Index, the European Public Real Estate Association/National Association of Real Estate Investment Trusts (EPRA/NAREIT) Global Real Estate Index and Global Property Research (GPR) Asia 250. CapitaLand Ascendas REIT has an issuer rating of ‘A3’ by Moody’s Investors Services.
CLAR is managed by CapitaLand Ascendas REIT Management Limited, a wholly owned subsidiary of Singapore-listed CapitaLand Investment Limited, a leading global real estate investment manager with a strong Asian foothold.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | -2.5% | No Info |
DPU for the first half of FY2024 decreased by 2.5% to SGD0.0752 per share from SGD0.0772 per share for the same period in the previous financial year. This is Unfavorable, although the decrease is mainly due to a larger unit base and as noted, there was an increase in distributable income by 1.0%. When compared to the previous half, DPU increased slightly by 1.1% given that the number of units had remained relatively consistent.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 93.1% | 93.3% |
Occupancy rate as of 30 June 2024 decreased slightly to 93.1%. This metric remains Neutral as it is below my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 37.8% | 38.3% |
Gearing ratio has decreased to 37.8% as of 30 June 2024. This has shifted back to the Favorable territory.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.5x | 3.6x |
The adjusted interest coverage for the trailing 12 months decreased slightly to 3.5 times as of 30 June 2024. This metric remains Favorable as the coverage ratio is above my preferred coverage of 3.0 times in the current high-interest rate environment.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.7 years | 3.4 years |
Weighted average term to maturity of their debt lengthened to 3.7 years as of 30 June 2024. This is Favorable and it allows them sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.22 | 1.13 |
The Price to Book (“P/B”) ratio currently stands at 1.22. This was computed using the closing share price of SGD2.76 as of 19 August 2024 and net asset value per share of SGD2.27 as of 30 June 2024. The P/B ratio remains Neutral, though it is noted that it has become more expensive with the recent increase in share price and investors are paying a larger premium.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 5.42% | SGD 0.150 |
| 2023 | 5.67% | SGD 0.156 |
| 2022 | 5.62% | SGD 0.155 |
| 2021 | 3.37% | SGD 0.093 |
| 2020 | 5.98% | SGD 0.165 |
| 2019 | 5.83% | SGD 0.161 |
With the dividend payout in September 2024, the total dividend payout for the calendar year 2024 amounted to SGD0.150 per share. With a closing price of SGD2.76 on 19 August 2024, this translates to a dividend yield of 5.42%. For my benchmark, a general reasonable yield would be around 5.75% and as CLAR is trading below my benchmark, the dividend yield is Neutral.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
If using dividend yield of 5.75% as a benchmark, based on the dividend of SGD0.150 there is potential for CLAR to see its share price drop by 5.5% to SGD2.61. Investors will thus need to be mentally prepared that the share price might fall.
| Yield | Share Price | Downside |
|---|---|---|
| Current (5.42%) | 2.76 | – |
| 5.75% | 2.61 | -5.5% |
| 6.75% | 2.22 | -19.5% |
Interest Rate Sensitivity
The Federal Reserve on 1 August 2024 kept its key interest rate at 5.25% to 5.50% ever since raising it on 26 July 2023. However, citing “some further progress” toward its 2% inflation goal, Fed Chair Jerome Powell at the press conference said a rate cut in September is “on the table,” provided the inflation data continues to be encouraging.
Website: Fed recap: Chair Powell gives the September rate cut signal traders were hoping for
CLAR have provided the interest rate sensitivity analysis as below. Should the interest rate increase by another 1.0%, using FY2023 distribution as a base, distribution is expected to decrease by 1.7%. Together with other cost pressures, DPU may be negatively affected moving forward and investors should keep a keen eye out for the interest coverage.
| Change in Interest Rates | Decrease in Distributable Income (SGD’000) | Change as % of FY2023 Distribution |
|---|---|---|
| + 50 bps | -$5,600 | -0.9% |
| + 100 bps | -$11,200 | -1.7% |
| + 150 bps | -$16,800 | -2.6% |
| + 200 bps | -$22,400 | -3.4% |
Other metrics
Tenant profile
CLAR has a well-diversified tenant profile of 1,780 tenants with the top 10 customers as of 30 June 2024 only account for about 17.5% of monthly portfolio gross revenue. Furthermore, no single customer accounts for more than 3.4% of CLAR’s monthly gross revenue. This is Favorable as CLAR will not be too reliant on any single tenant for income.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | -2.5% | Unfavorable |
| Occupancy | 93.1% | Neutral |
| Gearing Ratio | 37.8% | Favorable |
| Interest Coverage | 3.5x | Favorable |
| Debt Maturity Profile | 3.7 years | Favorable |
| Price to Book Ratio | 1.22 | Neutral |
| Overall | Neutral |
The overall metrics indicate that it remains Neutral to invest in CLAR. The fundamentals remain relatively unchanged for this quarter. This is a good indicator of stability and can give investors a peace of mind, although they will need to pay for it as CLAR is trading at a premium from its book value.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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