CapitaLand Ascendas REIT DPU falls by 2.5% - Our Quick Take

Summary of CapitaLand Ascendas REIT's 1H24 results

CapitaLand Ascendas REIT reported its results and dividends for the first half of 2024 (1H24).

• CapitaLand Ascendas REIT (CLAR) declared DPU of 7.524 cents in 1H24, which was 2.5% lower than 1H23 due to a bigger unit base. 
• This translates to an annualized yield of 5.6%. 
• Distributable income rose 1% year-on-year to S$330.8m, despite 14.3% higher net finance cost to S$138m. 

Gross revenue rose 7.2%, derived from acquisitions and completion of development work in 2023. 

Net property income (NPI) yield edged higher to an annualized 6.3% in 1H24 (FY23: 6.0%) with positive rental reversion of 13.4% and high portfolio occupancy rate of 93.1%. 

Management expects the rent reversion to rise at a slower pace of positive high single-digit for FY24. This was more upbeat than the mid-single-digit growth guided in 1Q24.

Singapore, Australia and UK/Europe have maintained or improved on occupancy rates. US’ occupancy declined to 87.7%, down 1.8% point from end-Mar, due to expiry of leases at two single-tenant properties. 

US still sees negative absorption for business parks with office demand likely to continue trending lower in the next two quarters.

Singapore industrial space continue to enjoy good demand, while logistics spaces have normalized from the super-charged growth during Covid. 

Business parks demand have also improved with more flexibility in usage and possibility of conversion of use. CapitaLand Ascendas REIT has six ongoing AEI work in Singapore for S$572.8m. The average ROI from recent AEI completed at Aperia was 7.5-8.0%. 

Gearing has improved to 37.8%, from 38.3% at Mar-23. The average interest rate is marginally lower at 3.7% (1Q24: 3.8%) and interest cover ratio is flat at 3.6x. 82.6% of its debts are on fixed rates. 

CapitaLand Ascendas REIT expects to maintain effective interest rate at 4% or lower for FY24.

Beansprout's take on CapitaLand Ascendas REIT 1H24 results

The results are likely to be viewed positively by investors, as total distribution was higher despite an increase in borrowing costs. 

CapitaLand Ascendas REIT's balance sheet improved with minimal debt refinancing and lease expiry for 2024.

CapitaLand Ascendas REIT's bigger balance sheet gives it room to embark on development and AEIs, which would drive appreciation in asset value and future income. 

Some of the assets in its portfolio could also be converted into other uses such as data centres.

Acquisitions may also be on the cards, as lower interest rate and rising cap rates could deliver accretive yield. 

However, management has ruled out Australia, given the current mismatch between cap rates and interest rates. 

CapitaLand Ascendas REIT currently trades at a price-to-book valuation of 1.2x. The REIT is expected to offer a dividend yield of 5.7%.

Dive deeper into the CapitaLand Ascendas REIT with our checklist and find out if it may be worthwhile adding the REIT to your watchlist. 

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Related links:

• CapitaLand Ascendas REIT share price and share price target
• CapitaLand Ascendas REIT dividend forecast and dividend history

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