CapitaLand Ascott Trust posts 14.1% rise in H2 DPS to S$0.038

CAPITALAND Ascott Trust ’s (Clas) on Monday (Jan 29) posted a 14.1 per cent rise in distribution per stapled security (DPS) to S$0.038 for the second half ended Dec 31, 2023, from S$0.0333 in the year-ago period.

The managers attributed the growth mainly to stronger performance and contributions from new properties, based on the results released.

DPS remained unchanged on a year-on-year basis at S$0.03, after excluding one-off items related to realised exchange gains arising from the repayment of foreign currency bank loans and the settlement of cross-currency interest rate swaps.

Revenue for the half-year period stood at S$397.6 million, up 12.4 per cent from the S$353.8 million recorded in the same period the year before.

The managers attributed the increase to higher revenue from its existing portfolio and S$18.2 million in additional contributions from acquisitions. This was partially offset by a drop in revenue from the divestment of four French properties in September 2023.

The stapled group acquired nine properties in Australia, France, Japan, Vietnam and the US, four turnkey rental housing properties in Japan, and three properties in Indonesia, Ireland and the UK.

It recorded a 10 per cent increase in revenue per available unit (RevPau) of S$157 for H2 2023, reaching 103 per cent or pre-pandemic levels in H2 2019, on a pro-forma basis.

Speaking during an earnings briefing on Monday, Serena Teo, chief executive of the manager, noted that Clas’ higher RevPau was primarily driven by higher average daily rates in 2023.

Portfolio occupancy, meanwhile, stood at around 77 per cent in the fourth quarter, which was around 92 per cent of pre-pandemic levels.

“We do feel that as international flight capacities continue to increase, as more visa-free travel continues to be introduced, we expect some increase in occupancies to continue to contribute to RevPau,” Teo said.

Clas’ total distribution was up 24.4 per cent to S$140.8 million from S$113.2 million in the same period the previous year. The distribution will be paid out on Feb 29, after the record date on Feb 6.

For the full year ended Dec 31, 2023, DPS rose 15.9 per cent on year to S$0.0657 from S$0.0567. After adjusting for one-off items, DPS stood at S$0.0544, up 14 per cent from S$0.0479 recorded in the same period the year before.

While RevPau recovered to pre-Covid levels, the S$0.0657 DPS for FY2023 remained below the DPS of S$0.0761 in FY2019, before the pandemic.

Teo noted that RevPau only rose to pre-pandemic levels in the fourth quarter of 2023 and not the full year, and various costs in 2023 were also higher.

She noted that Clas’ portfolio reconstitution strategy – including acquisitions, divestments and ongoing asset enhancement initiatives – is still underway.

“That full impact is actually not felt yet,” she said, but added that she believes the portfolio has capacity to continue to grow.

In terms of acquisitions in 2024, Clas said it would consider assets across its five key geographies – Singapore, Australia, Japan, Europe and the US.

“We are in a way quite opportunistic,” said Gerry Chan, managing director of real estate investment trust investments. “Besides Japan, there are other regions (where) the market dynamics are changing quite a bit, because... interest rates are starting to fall, not only in the near term, but also in terms of long-term financing.”

Revenue for the full-year period was up 19.8 per cent to S$744.6 million, while total distribution climbed 24.9 per cent to S$237 million.

Clas’ gearing stood at 37.9 per cent as at Dec 31, 2023, with a debt headroom of about S$2 billion. The stapled group raised its proportion of debt on fixed rates to 81 per cent and has some S$1.32 billion in cash and available credit facilities.

Finance costs rose 26 per cent on year in FY2023 to S$86.8 million. Clas’ average cost of debt was around 2.4 per cent per annum in 2023, but the manager expects this to rise closer to the 3 per cent level this year.

This is due to a higher proportion of debt denominated in euros and pounds following recent acquisitions, as well as refinancing of around S$500 million of debt in 2024.

Clas’ portfolio valuation rose 2 per cent or around S$156 million in 2023, as strong operating performance and outlook outweighed cap rate expansion.

Teo acknowledged that the macroeconomic landscape presents various challenges, such as slower economic growth and geopolitical tensions. However, international travel continues to improve, with expectations for increasing flight capacity in China this year.

“Amid these uncertainties and the environment, we are cautiously optimistic about the demand for lodging,” she said.

Clas’ stapled securities were trading at S$0.95 as at 3.40 pm on Monday, up 2.2 per cent or S$0.02.