SGX-listed CapitaLand Ascendas REIT (SG:A17U) reported resilient full-year results despite macro headwinds. The company’s distribution per unit (DPU) declined 4% to 15.160 Singapore cents due to a high interest rate environment and an enlarged unit base. Nonetheless, the company managed to generate higher net income. Analysts are cautiously optimistic about the stock due to persistent macro pressures.
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CapitaLand Ascendas REIT is a real estate investment trust (REIT) focused on tech and logistics properties in developed markets. As of December 31, 2023, the REIT had S$16.9 billion investment properties under management.
CapitaLand Ascendas Navigating Through Challenges
CapitaLand Ascendas’ FY23 gross revenue increased by 9.4% to S$1.48 billion due to acquisitions, full-year contribution from properties purchased in the previous year, and higher occupancy. Gross revenue also gained from positive rental reversions (occurs when lease is renewed at a higher rental rate) in the company’s Singapore portfolio.
The REIT’s net property income grew 5.6% to S$1.02 billion, even as higher utility expenses and increased property taxes weighed on the Singapore portfolio. This marked the first instance that net property income crossed the S$1 billion mark since the REIT’s initial public offering (IPO) in 2002. Capital Ascendas ended 2023 with an occupancy rate of 94.2%, driven by the strength in Singapore portfolio, partially offset by the lower occupancy in US properties.
Looking ahead, CapitaLand Ascendas expects the addition of high-quality business properties, industrial logistics locations, and data centre properties to diversity its portfolio and make its income stream resilent. It is also enhancing returns by upgrading its properties.
What is the Share Price Target for CapitaLand Ascendas?
Following the results, Goldman Sachs analyst Xuan Tan reiterated a Buy rating on CapitaLand Ascendas stock with a price target of S$3.35. The analyst noted that the average rental reversion remained strong at 13.4% in FY23 and was higher than management’s previous guidance of high-single-digit growth.
Tan highlighted that for FY24, management expects mid-single-digit reversion, backed by redevelopment and acquisitions in the existing markets.
Analysts have a Moderate Buy consensus rating on A17U stock based on two Buys. The CapitaLand Ascendas share price target of S$3.20 implies 11.5% upside potential. Shares have declined more than 4% over the past year. A17U offers an attractive dividend yield of over 5%.
