Singapore Market Stocks

CapitaLand Ascott Trust (SGX:HMN) Q4 and FY 2022 Results – Riding the Travel Recovery Wave

Calvin Lo

CapitaLand Ascott Trust (CLAS) (SGX:HMN) reported Q4 and FY 2022 results on 30 Jan 2023, which were green across the board. CLAS reported 80% increase in 2H 2022 gross profit due to 81% growth in Revenue Per Available Unit (RevPAU) to pre-pandemic levels and quality acquisitions.

Source: CLAS FY 2022 presentation slides

DPS for 2H 2022 also rose 47% yoy to 3.33 cents, and FY 2022 DPS increased 31% yoy to 5.67 cents. CLAS is now yielding around 5.1% (HMN price of S$1.11 as of 31 Jan 2023).

CLAS boasted QoQ growth in RevPAU across all its key markets, with portfolio RevPAU reaching pre-covid Q4 2019 pro forma RevPAU (including assets from Ascendas Hospitality Trust). Ascendas H-Trust combined with Ascott Residence Trust in 31 Dec 2019 to form what is now CLAS.

CLAS expects the post-covid recovery to continue gathering steam in 2023. The World Tourism Organization expects international arrivals to reach 80-95% of pre-pandemic levels in 2023, up from 65% in 2022.

CLAS intends to capture this growth through a mix of growth income from management contracts of serviced residences and hotels (beneficiaries of travel recovery), and stable income from contracts with fixed/minimum rent component and management contracts of longer-stay assets (resilient and counter-cyclical).

CLAS portfolio is also very well diversified globally, with a 60/21/19 split between Asia-Pacific/Americas/Europe.

CLAS longer-stay asset allocation now stands at 19% after the recent acquisitions in 2022, and it plans to further increase that to 25-30% of the portfolio.

In terms of capital management, CLAS has 52% of total assets in foreign currency hedged and has a gearing ratio of 38% with ~$1.8B debt headroom before hitting MAS limit of 50%.

My thoughts

CLAS is in prime position to continue to benefit from the travel recovery, while also taking the opportunity to add to the resilience of the portfolio with a higher proportion of longer-stay assets. CLAS is also one of the more diversified REITs geographically, so it can benefit even if some parts of the world have not fully reopened.

However, CLAS stock (SGX:HMN) price has risen quite a bit from the 1Y lows around late Oct 2022 and is getting close to its 1Y highs of S$1.18. Pre-pandemic though the stock traded as high as S$1.36. HMN is also trading at a slight premium price/NAV of 1.109. Dividend yield of 5.1% is not high either considering the risk-free rate (SGS bonds) is around 4%.

Source: Google Finance
Source: CLAS website

Most analysts are positive on HMN though, with most having BUY or ADD rating and a target price as high as S$1.40.

Source: SGinvestors.io

Personally, I’m happy with the results and prospects of CLAS. I’ll be holding onto my position, but will probably not add to it at these prices. Maybe if there’s a pullback to $1.00 that might be enticing enough for me to add there.

Disclosure: I’m long SGX:HMN

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