Business recovery to drive CapitaLand Ascott Reit’s leverage further down: Fitch Ratings
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Derryn Wong
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THE return to pre-pandemic levels of travel in the Asia-Pacific region will help CapitaLand Ascott Real Estate Investment Trust (CapitaLand Ascott Reit) boost revenue and deleverage, said credit rating agency Fitch.
In a report released on Thursday (May 18), the agency also upgraded the Reit’s long-term issuer default rating (IDR) to BBB, from BBB-, with a stable outlook. The Reit’s key markets are Australia, Japan and Singapore, and it focuses largely on the hospitality sector.
The rating agency places the Reit’s peer, CDL Hospitality Trusts , two notches below (BB+/Stable) on account of the latter’s weaker business profile. Mapletree Logistics Trust is however rated a notch higher (BBB+/Stable) than CapitaLand Ascott Reit to reflect a better cash-flow visibility due to its portfolio diversification and larger scale.
In its report, Fitch said its rating upgrade on CapitaLand Ascott Reit reflects its “business recovery and sharp deleveraging in 2022”, which the agency expects to sustain into 2023 despite economic challenges in some markets.
On the earnings front, it predicts that the Reit’s revenue per available unit will reach 90 per cent of pre-pandemic levels in 2023, and 95 per cent by 2024, up from around 80 per cent in 2022. It also predicts a total revenue growth of around 20 per cent in 2023. This will be driven by the recovery in global travel, which will drive high room rates, as Fitch expects higher airline capacity in the next 12 to 18 months. Fitch forecasts that the Reit’s net debt will fall to 8.5 times its earnings before interest, taxes, depreciation and amortisation for 2023, which is well clear of the credit rating agency’s BBB rating threshold of 9.5 times.
CapitaLand Ascott Reit, together with CapitaLand Ascott Business Trust, is traded as the stapled group CapitaLand Ascott Trust (Clas). Fitch says that its rating is based on the consolidated profile of the two, since “there are strong operating and strategic linkages and complete cash fungibility between the two trusts, as provided by the stapling deed”. Fitch’s IDR, however, relates only to the Reit, and not CapitaLand Ascott Business Trust.
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As at 2.05 pm, Clas was trading unchanged at S$1.04.
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