CapitaLand Ascott Trust (CLAS) increased its 1H 2024 gross profit by 12% year-on-year (y-o-y) to S$172.9 million. Revenue also rose by 11% y-o-y, reaching S$386.4 million. The increase was mainly on the back of sustained lodging demand and stronger operating performance. On a same store basis, gross profit and revenue increased by 3% and 4% y-o-y respectively.
As demand for international travel continued to increase, CLAS’ revenue per available unit (REVPAU) for 1H 2024 grew 5% to S$145, compared to 1H 2023. On a quarterly basis, CLAS’ REVPAU for 2Q 2024 went up by 4% y-o-y to S$155. This exceeds pre-pandemic levels, at 102% of 2Q 2019 pro forma REVPAU. All key markets also performed at or above pre-pandemic levels on a same-store basis. The increase in REVPAU was a result of higher room rates, with key markets Japan and United States of America (USA) leading the growth.
Distribution per Stapled Security (DPS) for 1H 2024 was 2.55 cents. Acquisitions, completed asset enhancement initiatives (AEIs) and interest savings from the repayment of higher-interest debt mitigated the impact of divestments and ongoing AEIs, while the depreciation of most foreign currencies against the Singapore Dollar affected distributions. Excluding the lower level of non-periodic items, adjusted DPS for 1H 2024 was relatively stable at 2.41 cents. Total distribution for 1H 2024 was S$96.5 million, comparable to S$96.3 million in 1H 2023.
Mr Lui Chong Chee, Chairman of CapitaLand Ascott Trust Management Limited and CapitaLand Ascott Business Trust Management Pte. Ltd. (the Managers of CLAS), said: “CLAS’ operating performance remains robust, delivering double-digit growth for revenue and gross profit in 1H 2024. We continue to press forward with our portfolio reconstitution efforts to enhance CLAS’ portfolio resilience and position CLAS for future growth. In the past year, CLAS announced divestments of S$408.1 million across 10 mature assets. Divested at a premium to book value, we will unlock about S$44.6 million in gains, at an average exit yield of about 3.8%. This strengthens our financial capacity to redeploy capital towards optimal and accretive uses. We remain committed to delivering long-term returns to Stapled Securityholders.”
Ms Serena Teo, Chief Executive Officer of the Managers of CLAS, said: “Part of the divestment proceeds has also been used to pare down higher-interest debt, keeping our gearing healthy at 37.2% and delivering accretion as we evaluate opportunities to redeploy the capital. In 1H 2024, we have also completed AEI for four of our properties. Located in key gateway cities, they are well-positioned to capture demand from tourism, business activities and events.”
“Looking ahead, as pent-up demand for travel moderates, regular travel patterns and seasonality are expected to return in more markets. CLAS maintains a cautiously positive view on the demand for lodging. In 1H 2024, stable income sources contributed about 65% of CLAS’ gross profit, while the remaining 35% was from growth income sources. CLAS’ operational performance is expected to remain resilient. Our geographic diversification, range of lodging asset classes and different contract types provide a strong foundation amidst global uncertainties,” added Ms Teo.
Driving growth via CLAS’ active portfolio reconstitution strategy
CLAS enhances the quality and returns of its portfolio through its active portfolio reconstitution strategy. In June 2024, CLAS acquired the remaining 10% stake in Standard at Columbia, a freehold student accommodation property in South Carolina, USA. The earnings before interest, taxes, depreciation and amortisation (EBITDA) yield on CLAS’ total investment cost is expected to be approximately 7%. The acquisition was funded by proceeds from CLAS’ divestments.
In January 2024, CLAS also completed the turnkey acquisition of Teriha Ocean Stage, a 258-unit rental housing property in Fukuoka, Japan at an estimated net operating income yield of about 4% on a stabilised basis and expected pro forma DPS accretion of 0.5%. In 1H 2024, CLAS’ longer-stay properties comprising student accommodation and rental housing properties achieved a strong average occupancy rate of over 90%.
CLAS’ AEI plans are also progressing well. The remaining four properties under AEI are expected to be completed in phases from 2H 2024 to 2026. Additionally, construction of the new Somerset serviced residence at the popular riverfront lifestyle and entertainment precinct of Clarke Quay is slated for completion in 2026. These initiatives, when completed, are expected to uplift CLAS’ distribution income.
CLAS remains in a healthy financial position
CLAS remains in a healthy financial position and continues to adopt an active and prudent approach towards capital management. CLAS’ average cost of debt remains low at 3% per annum as at 30 June 2024. It is expected to be stable through to the end of 2024, as about 82% of CLAS’ debt is effectively on fixed rates and the weighted average debt to maturity is 3.6 years. Interest cover is also healthy at 3.7 times. CLAS’ gearing is 37.2%, which is well below the 50% gearing limit allowable under the property funds appendix issued by the Monetary Authority of Singapore. CLAS also has a total of approximately S$1.29 billion in cash on-hand and available credit facilities.
