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Elevator Pitch
CapitaLand Ascendas REIT (OTCPK:ACDSF) [A17U:SP] is rated as a Maintain.
My earlier November 28, 2023 update touched on the divergence within the efficiency of CapitaLand Ascendas REIT’s totally different belongings and the REIT’s inorganic progress technique. On this newest write-up, I draw consideration to ACDSF’s Q1 2024 enterprise replace, and the REIT’s response to shareholders’ questions in relation to this 12 months’s Annual Basic Assembly or AGM.
I proceed to have a combined view of CapitaLand Ascendas REIT following an evaluation of the REIT’s newest disclosures. The REIT’s latest quarterly operational replace and its replies to buyers’ queries have each constructive and detrimental read-throughs. Due to this fact, I’ve chosen to retain a Maintain ranking for the REIT.
The REIT could be traded on the SGX (Singapore Change) and the OTC (Over-The-Counter) market. CapitaLand Ascendas REIT’s OTC shares boasted a mean day by day buying and selling worth of $0.04 million (supply: S&P Capital IQ) for the previous three months. Compared, the three-month common day by day buying and selling worth for the REIT’s Singapore-listed shares was a lot larger at $25 million as per S&P Capital IQ knowledge. Interactive Brokers is without doubt one of the US brokerages which permit their shoppers to purchase or promote CapitaLand Ascendas REIT’s Singapore-listed shares which have higher buying and selling liquidity.
First Quarter Enterprise Replace
On condition that CapitaLand Ascendas REIT is listed in Singapore, it solely stories its full monetary outcomes twice yearly. Nonetheless, the REIT does present updates on its operations for the primary and third quarters of the 12 months.
CapitaLand Ascendas REIT revealed its Q1 2024 business update presentation slides on April 22. There are each constructive and detrimental takeaways from the REIT’s newest quarterly efficiency.
On one hand, the REIT’s portfolio occupancy fee decreased on each a sequential and YoY (12 months-on-12 months) foundation in Q1 2024.
The portfolio occupancy fee for CapitaLand Ascendas REIT declined from 94.4% as of March 31, 2023 and 94.2% on the finish of 2023 to 93.3% as of end-Q1 2024. This suggests that the REIT’s portfolio occupancy contracted by -110 foundation factors YoY and -90 foundation factors QoQ (Quarter-on-Quarter) for the most recent quarter.
Particularly, the REIT’s belongings within the Australia and the UK/Europe markets noticed their portfolio occupancy charges lower by -210 foundation factors and -180 foundation factors, respectively in Q1 2024 on a sequential foundation. In its first quarter enterprise replace presentation, CapitaLand Ascendas REIT defined that the efficiency of its Australian properties was negatively affected by a “lease expiry of a single tenant at 16 Kangaroo Avenue, a logistics property (Sydney).” The decline within the occupancy fee of the REIT’s UK/Europe belongings was attributable to “a single-tenant lease expiry of a data center at Welwyn Garden” as per ACDSF’s disclosures in its Q1 enterprise replace.
It’s cheap to be involved that particular leases have expired and new tenants for these properties have not been secured by the top of the primary quarter.
However, CapitaLand Ascendas REIT registered a fairly good portfolio rental reversion for the leases it renewed in the latest quarter.
The REIT recorded a strong +16.9% portfolio rental reversion fee for Q1 2024, which was even higher than the +15.2% portfolio rental reversion achieved in This autumn 2023.
Particularly, CapitaLand Ascendas REIT’s Singapore logistics properties and US logistics belongings delivered portfolio rental reversion charges of +62.0% and +28.7%, respectively for the primary quarter of this 12 months. Trying ahead, the REIT maintained its present full-year FY 2024 portfolio rental reversion steerage on the “mid-single digit” proportion stage.
It’s encouraging to know that the REIT has managed to resume its latest expiring leases at larger rental charges.
To sum issues up, the REIT’s most up-to-date Q1 2024 outcomes have been combined, making an allowance for each decrease occupancy and powerful portfolio rental reversion.
Response To Shareholders’ Questions
ACDSF’s Annual Basic Assembly or AGM is held on April 26, 2024. Previous to the AGM, CapitaLand Ascendas REIT issued an announcement on April 22 addressing questions that have been beforehand raised by buyers.
The REIT’s response to shareholders’ questions have favorable and unfavorable read-throughs.
On the constructive aspect of issues, CapitaLand Ascendas REIT stays looking out for potential M&A offers that may increase its future efficiency.
Within the April 22, 2024 announcement, the REIT emphasised that “we continue to source for investment opportunities to deepen CLAR’s (CapitaLand Ascendas REIT’s) presence” in its present markets prioritizing “DPU (Distribution Per Unit)-accretive acquisitions.”
Notably, CapitaLand Ascendas REIT disclosed in its Q1 2024 replace presentation slides that it has an funding grade “A3 credit rating” and a “healthy” monetary leverage ratio of 38.4%. In different phrases, the REIT has the monetary power to supply assist for its inorganic progress plans.
On the detrimental aspect of issues, the valuations of sure properties owned by the REIT have declined on the finish of final 12 months. There may be additionally a particular asset in Singapore which is unleased and nonetheless looking for tenants for a protracted time period.
A shareholder requested concerning the “11 data centers in the UK/Europe” purchased in March 2021 that are at present valued at -17% beneath the preliminary buy consideration. In response, CapitaLand Ascendas REIT attributed this decline in valuation for these acquired knowledge heart belongings to “rise in capitalization rates, which are closely correlated to benchmark rates.” Contemplating the present “higher-for-longer” rate of interest expectations, there’s a danger of an additional contraction within the valuation of the REIT’s properties.
Additionally, the REIT famous {that a} “two-story high-specifications building” situated at “30 Tampines Industrial Ave 3” in Singapore has been with out a tenant for greater than a 12 months. Capital Ascendas REIT highlighted in its April 22, 2024 announcement that “the pool of potential tenants is limited” for this specific asset as a result of “specialized building specifications and location in a zone for semiconductor usage only.”
In abstract, it’s constructive that the REIT remains to be looking for potential inorganic progress alternatives and has the monetary power to pursue such offers. On the flip aspect, negatives for the REIT embrace the unfavorable influence of elevated rates of interest and sure belongings which is perhaps robust to lease out on account of particular circumstances.
Closing Ideas
ACDSF’s latest disclosures do not supply compelling causes to be both very bullish or extraordinarily bearish on the REIT. Due to this fact, a Maintain ranking for CapitaLand Ascendas REIT is honest.
Editor’s Notice: This text discusses a number of securities that don’t commerce on a significant U.S. trade. Please pay attention to the dangers related to these shares.
