On 25 October 2024, CapitaLand Ascendas Real Estate Investment Trust (“CLAR”) have announced their third quarter business update for FY2024. The significant thing to note this quarter is the decrease in portfolio occupancy by 1.0%, contributed by a lease expiry in Sydney for the 6-20 Clunies Ross Street, a logistics property. While management have disclosed that there is a new prospective tenant, we may see a further DPU impact in the next quarter announcement. The aggregate leverage also saw a notable increase this quarter, though there are no breakdowns in this business update for the reasons to the increase.
Do note on 11 October 2024, CLAR have announced the disposal of 21 Jalan Buroh in Singapore. The sales price amounted to SGD112.8 million which represents a 93.2% premium to original purchase price and 67.1% premium to recent valuation. The net proceeds after divestment costs are expected to be SGD102.9 million, which represents that the selling costs are approximately 9% of the selling price. As of now, I will admit I am not sure if this is the normal, but think is worth pointing out.
Website: General Announcement::Business Updates For The Third Quarter Ended 30 September 2024
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | No Info | -2.5% |
Based on the announcement on 25 October 2024, DPU was not included in the business update for the third quarter of FY2024.
The metric was Unfavorable for the first half of FY2024 as DPU decreased by 2.5% to SGD0.0752 per share from SGD0.0772 per share for the same period in the previous financial year, mainly due to a larger unit base.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 92.1% | 93.1% |
Occupancy rate as of 30 September 2024 decreased further to 92.1%. This metric has shifted towards Unfavorable as it is below my expected healthy occupancy rate of 95%. The biggest change was the decrease in occupancy for their Australia properties by 5.1% quarter on quarter to 91.7% from 96.8%, due to a lease expiry in Sydney for the 6-20 Clunies Ross Street, a logistics property. Management has disclosed that they are in discussions with a prospective tenant to lease up the place.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 38.9% | 37.8% |
Gearing ratio has increased to 38.9% as of 30 September 2024. This has shifted back to the Neutral territory.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.5x | 3.5x |
The adjusted interest coverage for the trailing 12 months remains unchanged at 3.5 times as of 30 September 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 | 3.4 years | 3.7 years |
Weighted average term to maturity of their debt shortened to 3.4 years as of 30 September 2024. This metric remains 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 | 1.18 | 1.22 |
Based on the announcement on 25 October 2024, net asset value (“NAV”) was not included in the business update for the third quarter of FY2024.
The Price to Book (“P/B”) ratio currently stands at 1.18. This was computed using the closing share price of SGD2.67 as of 1 November 2024 and net asset value per share of SGD2.27 as of 30 June 2024. The P/B ratio remains Neutral.
As of 1 November 2024, the Market Capitalization is approximately SGD11,740 million.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 5.60% | SGD 0.150 |
| 2023 | 5.86% | SGD 0.156 |
| 2022 | 5.81% | SGD 0.155 |
| 2021 | 3.48% | SGD 0.093 |
| 2020 | 6.18% | SGD 0.165 |
| 2019 | 6.03% | SGD 0.161 |
As there are no further dividend payouts for 2024 as of the date of this article, the total dividend payout for the calendar year 2024 remains at SGD0.150 per share. With a closing price of SGD2.67 on 1 November 2024, this translates to a dividend yield of 5.60%. For my benchmark, a general reasonable yield would be around 5.00% and as CLAR is trading above my benchmark, the dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q4 – 5.00%
In the event that should the required dividend yield increase to 6.00% as a benchmark, based on the dividend of SGD0.150 there is potential for CLAR to see its share price drop by 6.4% to SGD2.50.
| Yield | Share Price | Downside |
|---|---|---|
| Current (5.60%) | 2.67 | – |
| 6.00% | 2.50 | -6.4% |
| 7.00% | 2.14 | -19.7% |
Interest Rate Sensitivity
The Federal Reserve on 18 September 2024 have slashed interest rate by half a point to a range of 4.75% to 5.00%, the first time since raising it to its highs on 26 July 2023. This is a good indicator of potential future rate cuts which will greatly benefit REITs in reducing their finance costs.
Website: Fed slashes interest rates by a half point, an aggressive start to its first easing campaign in four years
CLAR have provided the interest rate sensitivity analysis as below. Should the interest rate change by another 1.0%, using FY2023 distribution as a base, distribution is expected to change by 2.0%.
| Change in Interest Rates | Change in Distributable Income (SGD’000) | Change as % of FY2023 Distribution |
|---|---|---|
| 50 bps | $6,600 | 1.0% |
| 100 bps | $13,200 | 2.0% |
| 150 bps | $19,700 | 3.0% |
| 200 bps | $26,300 | 4.0% |
Other metrics
Tenant profile
CLAR has a well-diversified tenant profile of 1,790 tenants with the top 10 customers as of 30 September 2024 only account for about 16.5% of monthly portfolio gross revenue. Furthermore, no single customer accounts for more than 3.2% 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 | No Info | Unfavorable |
| Occupancy | 92.1% | Unfavorable |
| Gearing Ratio | 38.9% | Neutral |
| Interest Coverage | 3.5x | Favorable |
| Debt Maturity Profile | 3.3 years | Favorable |
| Price to Book Ratio | 1.18 | 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.
Background
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.
Previous Post
Website: CapitaLand Ascendas Real Estate Investment Trust (SGX: A17U): 2024 Half Year Result
2 thoughts on “CapitaLand Ascendas Real Estate Investment Trust (SGX: A17U): 2024 Third Quarter Business Update”
Comments are closed.