Is Capitaland Ascott Trust A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Capitaland Ascott Trust 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.

Information Is Accurate Up To Apr 2025

Business Description

CapitaLand Ascott Trust is a hospitality REIT that was incepted on 31 December 2019 via an M&A between Ascendas Hospitality Trust and Ascott Residence Trust. The trust now owns over 100 hospitality properties across the world with a larger focus within the Asia region.  

What I Like About CLAS:

• The manager demonstrated competency in managing their capital management which helped cushion the impact of a high-interest rate environment (Figures 4 & 5)
  

• The manager has demonstrated strong capabilities in delivering yield-accretive capital recycling and acquisition and has a very clear strategy for managing their portfolio.
  

• The portfolio is well-positioned and diversified across regions with strong hospitality industries. (Figure 10)
  

• For FY2024, approximately 63% of CLAS gross profits were from stable sources, compromising master leases, management contracts with minimum guaranteed income and longer stay accommodations.

What I Do Not Like About CLAS:

• -

Updates From Recent Performance (FY 2024)

General Comments:

• DPU from operations have decreased by 4.46% at the back of higher cost of borrowing and foreign exchange losses, which offset the strong top-line growth of 10% in gross profit.
  

• The gearing ratio increased by 0.4% to 38.30%, and the cost of borrowing increased by 0.6% to 3%.
  

• CLAS completed over S$500m in divestments at premiums of up to 55% above book value, realizing approximately $74m in capital gains. CLAS has also completed about S350m in acquisition and 6 AEI projects.
  

• Decent annual growth in the operational measures: Occupancy rate (+1%), ADR (+$7) and Revenue Per Available Room (+$8)

Positive Headwinds:

• The current portfolio occupancy (77%) is still significantly below pre-COVID (92%) levels, which presents more room for further improvement in performance without increasing its overall capacity.

Negative Headwinds:

• Increasing global economic uncertainty may result in a lower demand for both leisure and corporate travel which may result in a lower occupancy rate and hence lower revenue for the hospitality sector.
  

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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

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