CapitaLand Ascott Trust DPU falls by 8.2% - Our Quick Take

Summary of CapitaLand Ascott Trust's 1H24 results

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

• Capitaland Ascott Trust (CLAS) declared DPU of 2.55 cents in 1H24, 8.2% lower than 1H23, due to a larger number of units. However, total distribution was flat year-on-year. 
• This translates to an annualized yield of 5.7%.

1H24 revenue and gross profit increased 11% and 12% year-on-year, from stronger performance and contribution from new properties, partly offset by divestments and foreign exchange impact. Excluding acquisitions and divestments, gross profit was up 3% year-on-year.

Gearing improved slightly to 37.2% (1Q24: 37.7%) while interest cover and cost of borrowing were maintained at 3.7x and 3.0%, compared with 1Q24. Management expects the cost of debt to remain stable at 3.0% in 2024 (FY23: 2.4%).

Portfolio 2Q24 RevPAU grew 4% year-on-year to reach 102% of pre-Covid level. However, year-on-year growth rates have moderated in 2Q compared with 1Q across its five major markets. Japan and US remained the stronger markets, while Australia and UK saw decline in RevPAU.

Operationally, 2H is typically stronger than 1H. CLAS expects stronger performance in 2H24 compared with 1H24 with seasonally-stronger travel demand and contributions from acquired assets.

Beansprout's take on CapitaLand Ascott Trust 1H24 results

While CLAS did not top up the distribution with divestment proceeds, some of these have been used to pare down high-interest rate debt and set aside for AEI work to enhance earnings potential of the assets.

However, the year-on-year growth rates in the first half of the 2024 may not be sustained, due to the high base from 2H23. 

This is because with RevPAU at or exceed pre-Covid levels in most markets, RevPAU growth could moderate or turn negative. Macroeconomic uncertainties and currency risk could impact discretionary travel demand in its two strongest markets of US (21% of gross profit) and Japan (17% of gross profit). 

As a result, the year-on-year growth in revenue and gross profit in 2H24 might be lower than that in 1H24, in our view. 

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

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Related links:

• CapitaLand Ascott Trust share price and share price target
• CapitaLand Ascott Trust dividend forecast and dividend history

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