Ascendas REIT (SGX: A17U), now CapitaLand Ascendas REIT (CLAR) is Singapore’s first and largest listed business space and industrial real estate investment trust with a market cap of S$12.1 Billion.
Amid the pandemic last year, CapitaLand Ascendas REIT has performed well due to its resilient position in logistics and data centres. Nonetheless, with the pandemic ending, CapitaLand Ascendas REIT’s share price has fallen from its peak in July 2020 and remained flat for the entire year.
In this article, we will analyse if CapitaLand Ascendas REIT is still an attractive investment moving forward.
CapitaLand Ascendas REIT’s Portfolio Overview
As of 31 December 2021, Ascendas REIT has a portfolio of properties in Singapore, Australia, Europe (mainly in the United Kingdom), and the United States. Among these properties, it comprises Business and Science parks, Integrated development, High specs industrial & data centres, Light Industrial & Flatted Factories, and Logistics
Apart from being geographically diversified, Ascendas’s tenants are also well-diversified across industries, with the largest sector (Data centres) taking up only 11.7% of its portfolio.
Given such diversification, no single property of Ascendas accounts for more than 4.3% of its monthly gross revenue. This is great as it reduces any tenant concentration risk.
CapitaLand Ascendas REIT’s Financial Performance
Revenue
When we look at the financial performance of Ascendas REIT over the last five years, we can see that it is on an uptrend, with increased gross revenue, net property income, and distribution income year after year.
Note: As a result of the change in its financial year, FY2019 result is a nine-month period from 1 April 2019 to 31 December 2019 which explains why it is lower.
Occupancy and Lease Expiry
Ascendas’ portfolio occupancy has also improved, up to 93.2%.
Within the portfolio, there was also an average rent reversion of 4.5% for leases renewed in FY2021, which is a healthy sign as it would translate to higher rental income.
Although rent reversion is projected to be positive in the future, Ascendas anticipates it to be in the low single digits in FY2022 due to market uncertainty.
Note: They said the same thing last year, but we actually witnessed an improvement from last year’s 3.8%. Maybe the management wants to play it safe and keep expectations low.
Next up, the lease expiry for Ascendas is well spread out over the years. With a healthy portfolio Weighted Average Lease Expiry (WALE) of 3.8 years, we can expect a stable occupancy rate going forward.
NAV
Next up, the NAV per unit and total assets graph shows you that while Ascendas REIT grew its AUM by acquiring more properties, they have done it such that the shareholders benefit too.
With large acquisitions over the years, it is commendable that Ascendas was able to find properties that are yield accretive and one that increases its NAV per unit over the years.
Financial Strength
Growing revenue is just one factor.
REITs with a strong balance sheet are the ones that can do well, even during bad times. As of 31 December 2021, Ascendas REITs gearing ratio is at 35.9%, a slight increase from the previous year but still well below the regulatory limit of 50%.
Apart from that, they have a healthy interest coverage ratio of 5.7x, which provides the REIT with some headroom if required.
As seen from the figure above, its debt maturity is also well spread out. As such, I do not foresee any cash flow problem for Ascendas. Of all its properties, it is noteworthy that 92.1% are unencumbered properties which mean most of Ascendas’ properties are not listed as collateral for any loan.
Strong sponsor
Good REITs are usually those with good backing. For Ascendas REITs, its sponsor is Capitaland which has 18% stake in it. By having a strong sponsor like Capitaland, Ascendas can potentially enjoy lower interest rate on loans from financial institutions due to its reputation. Apart from that, it also ensures a pipeline of assets that Ascendas could acquire from Capitaland. At the moment, it has a pipeline of business and science park properties worth more than S$1.5 billion.
*Typically, there is usually a right of first refusal agreement between the REIT and its sponsor. As such, when the sponsor wants to sell its property, the REIT will be offered the right to purchase it before it is offered in the open market.
Continued acquisitions in 2021
Ascendas has continued to expand its real estate portfolio. The REIT completed a record S$2.1 billion in new investments in FY2021, boosting the combined value of its investment properties to S$16.3 billion.
Ascendas REIT made its first entrance into the overseas data centre market with the purchase of 11 data centres worth S$904.6 million in Europe. Galaxis (remaining 75 %) and 1-5 Thomas Holt Drive, both located in Singapore, and Macquarie Park, Sydney, Australia, were also acquired for S$818.4 million. And lastly, it enlarged its logistics portfolio by investing S$207.8 million for 11 last-mile logistics assets in Kansas City, Missouri.
The S$184.6 million built-to-suit business space property for Grab’s Singapore headquarters was also completed in the second half of 2021.
CapitaLand Ascendas REIT’s Valuation
So, is Ascendas a buy now? Let us take a look at its valuation.
Price to book
Ascendas REIT’s current PB Ratio is around 1.20. Given that its average PB ratio for the past 5 years is also around 1.20, I would say Ascendas REIT is fairly valued as of now.
Comparing its PB ratio with its peers, like Keppel DC REIT and MapleTree Industrial Trust, which has a PB ratio of 1.70 and 1.43, Ascendas REIT is much more undervalued. However, it’s worth noting that Keppel DC REIT and MapleTree Industrial Trust have a higher proportion of data centre properties than Ascendas REIT, which could explain why they’re trading at a considerably higher premium. Furthermore, the other two data centres have declined more over the last year, potentially making them an attractive alternative.
CapitaLand Ascendas REIT Dividend
In a nutshell, Ascendas offers:
- Annualised Dividend Yield: 4.6%
- Dividend Per Unit (DPU) in cents for 2021: 15.258
Many investors buy REITs for their dividends, so let’s take a look at Ascendas’ Dividend performance:
Ascendas REIT’s Dividend Yield and DPU
| Financial Year | Distribution per Unit in cents (SGD) | % Change in DPU | Dividend Yield (%) |
|---|---|---|---|
| 2021 | 15.258 | 3.9% | 4.6% |
| 2020 | 14.688 | 28% | 4.88% |
| 2019 | 11.49 | -28% | 3.87% |
| 2018 | 16.035 | 0% | 6.38% |
| 2017 | 15.988 | 8% | 6.01% |
| 2016 | 14.743 | -4% | 6.64% |
| 2015 | 15.36 | 5% | 6.89% |
| 2014 | 14.6 | 3% | 6.28% |
| 2013 | 14.24 | 4% | 6.62% |
| 2012 | 13.74 | – | 5.93% |
With a growing distribution income over the past years, we note a similar trend in Ascendas’ distribution per unit, which has risen by 3.9% year on year.
This increase is mainly attributed to contributions from newly acquitted properties and completed developments during FY2020 and FY2021. However, it still needs to increase slightly to go back to the level of FY2018.
Is Ascendas cheap based on their dividend yield?
Observing the dividend yield over the years, with an annualised dividend yield of 4.6% now, I would say Ascendas is fairly valued too, as compared to the average return of 5.5%.
Looking forward, I believe the yield will recover as the properties Ascendas recently acquired properties starts to generate profits. However, even without an improved dividend yield, I believe the current price is justified for a REIT that has performed well consistently over the years and its increasing stake in data centres.
Ascendas REIT Dividend 2022
In 2022, Ascendas REIT has announced dividend issuance on:
| Announcement Date | Ex-Dividend Date | Payout Date | Dividend Per Share (in cents) |
| 8-Feb-22 | 15-Feb-22 | 11-Mar-22 | 7.598 |
CapitaLand Ascendas REIT share price growth since IPO
Ascendas REIT IPO-ed in 2005 at a IPO price of $0.88 per unit, raising about $636 million. Since then, its share price has risen over the years despite a rather consistent dividend payout schedule.
If you had bought it at IPO and held it till 31st Dec 2021, you would be seating on 235% growth. That doesn’t even include the dividends you would have received over the years.
Now that we’ve studied Ascendas REIT in detail, let’s answer the most important question on your mind:
Should you buy CapitaLand Ascendas REIT now?
CapitaLand Ascendas REIT is well-positioned to benefit from global e-commerce and digital trends. Along with it, you get a management that has time and time again, demonstrated its alignment with retail stakeholders, providing great comfort.
In addition, investors should expect continued DPU growth in FY2022, thanks to a record $2.1 billion in acquisitions and AEIs in FY2021. All in all, this REIT remains an attractive proposition for investors, particularly those building a dividend portfolio.
Disclaimer: I currently do not have any position in CapitaLand Ascendas REIT.