ANALYSTS have trimmed target prices for CapitaLand Ascott Trust : HMN 0% (Clas) after lowering distribution per unit (DPU) forecasts, following its Q3 business update on Monday (Oct 30).

DBS Group Research cut its target price to S$1.20 from S$1.30, upon lowering its DPU estimate for FY2023 marginally to S$0.0584, to price in a higher unit base post-August’s equity fundraising.

The trimmed price also accounts for the timing discrepancy of income contributions from acquisitions, which were slightly offset by temporary debt repayment, said the DBS analysts in a report on Tuesday.

They maintained their “buy” call as they project Clas’ DPU growth to register a two-year compound annual growth rate of 4 per cent on conservative estimates, factoring in contributions from acquisitions and master lease renewals.

The projection, however, does not factor in a turn in the interest rate environment. Interest rates rising above expectations would still pose a key risk to Clas’ growth.

“Clas’ priority is to drive revenue per available unit through asset enhancement initiatives (AEI) and acquisitions,” the analysts said, noting greater upside impact to DPU growth by AEI completions.

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Similarly, Maybank Securities cut its target price to S$1 from S$1.20, after revising DPU estimates down by 5 per cent to 11 per cent.

This is to account for slower growth and higher costs of equity, in addition to a high base of the financials in the second half last year to be compared with.

Maybank analyst Krishna Guha noted that the reopening tailwinds are receding, likely resulting in slower growth for subsequent quarters.

However, Guha maintained a “buy” call as Clas, at a reasonable valuation, would still gain momentum from global travel recovery.

UOB Kay Hian, at the same time, revised its target price to S$1.25 from S$1.27 with its “buy” call unchanged, after trimming its DPU forecast for the next year by 2 per cent to account for higher debt cost.

While agreeing that restored travel demand would benefit Clas, the brokerage noted that its outlook is, however, “clouded by geopolitical uncertainties and tight financial conditions”.

The brokerage also recognised that Clas’ geographical diversification and balanced mix of growth and stable income assets would provide resiliency.

Meanwhile, CGS-CIMB maintained its “buy” call with an unchanged target price of S$1.32.

“Clas is our top pick in the sector as its diversified and balanced portfolio provides both stability and upside exposure to the hospitality sector as well as portfolio reconstitution opportunities,” the brokerage said.

Stapled securities of Clas were trading down 2.2 per cent or S$0.02 to S$0.895 as at the midday trading break on Tuesday.