Is Capitaland Ascendas REIT A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review 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 high capital preservation ability.

Business Description

CapitaLand Ascendas REIT (CLAR) owns industrial properties across Singapore, the United States, the United Kingdom & Australia.

What I Like About CLAR:

• The underlying land leases are relatively higher compared to other local industrial REITs. The management also has a good track record for yield accretive acquisitions, capital recycling and asset enhancements.

  
  

• The tenant and lease expiry profile is well-diversified, therefore subjecting investors to a low tenant concentration risk (Figure 12)

What I Do Not Like About CLAR:

• The DPU levels have yet to achieve a stable level pre & post COVID 19 and with the ongoing headwinds, further fluctuations of DPU are expected to persist. (Figure 8)

Updates From Recent Performance (FY2024)

General Comments:

• Portfolio occupancy decreased by 1.4% to 92.8% (driven by weakness in the United States and Australia) while rental reversion stands at 11.6% for leases renewed in FY2024.

  
  

• DPU from operations improved by 0.77% as the contributions from newly acquired properties outweighed the loss of contributions from the divested properties.

  
  

• The aggregate leverage remains relatively unchanged while the average cost of debt increased by 0.2% to 3.70%.  The cost of borrowing is expected to have peaked moving into FY2025, given the current interest rate environment.

  
  

• In FY2024, CLAR divested 4 logistic properties in Australia and Singapore at an approximate premium of 38% above market valuation.

  
  

• For property valuation, valuation remained relatively stable on a same-store basis as the improvements in Singapore properties was offset by the valuation decrease in offshore properties.

Positive Tailwinds:

• Demand for quality logistic assets in the US is expected to be healthy, driven by onshoring and reshoring trends and the management intends to increase their investments in this sector.

Negative Headwinds:

• An ongoing trade war and rising global economic uncertainty might reduce the demand for industrial assets globally. This may result in additional headwinds for industrial REITs.

  
  

• Further normalization of demand in the Australian industrial and logistic market may result in continued short-term fluctuation of CLAR Australian portfolio’s performances.

  
  
  
  

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore