Should You Invest In CapitaLand Ascendas REIT [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of CapitaLand Ascendas REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To March 24

Business Description

CapitaLand Ascendas REIT (CLAR), formerly known as Ascendas Real Estate Investment Trust (before 2020) was listed in 2002 and owns 232 industrial properties across Singapore, United States, United Kingdom & Australia.

What I Like About CapitaLand Ascendas:

Very stable and growing distribution
Underlying land leases are relatively higher as compared to other local industrial REIT
Well-diversified tenants and low-concentration risk
Decently resilient occupancy rate and WALE
Management has a good track record of performing yield accretive acquisitions, capital recycling and asset enhancement initiatives.

What I Do Not Like About CapitaLand Ascendas:

The counter has been too richly valued in the past few years and is difficult to find a good entry price to start a position

Updates From Recent Performance (FY 2023)

General Comments:

High level of FX natural hedge: 81%
Decent positive portfolio rental reversion: +13.4%
Top-line and bottom-line performance improved as a result of contributions by acquisition, higher occupancy and positive rental reversion in Singapore’s portfolio.
DPU declined by 1.4% as a result of higher borrowing costs and an enlarged unit base.

Positive Headwinds:

4 Acquisitions amounting to S$885.3 million are expected to contribute to the performance of FY 2024 performances.

Negative Headwinds:

The cost of borrowing is expected to increase further from 2023 to 2025 as around 34% of the debt is due to renewal at a time when interest rates are likely to peak and stay high before coming back down.

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- Work In Progress -

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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