THE SINGAPOREAN INVESTOR

A Review of CapitaLand Ascendas REIT, CapitaLand India Trust, and CapitaLand Integrated Commercial Trust's Q1 FY2024 Business Updates

ljunyuan
Publish date: Wed, 24 Apr 2024, 06:01 PM
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My name is Jun Yuan, and I am the owner of The Singaporean Investor. I am a full-time retail investor and trader since April 2017, and in this website, I'd be sharing with you my personal analyses of Singapore-listed companies, along with advices relating to investing, as well as trading. You can find out more about me here, and check out my long-term portfolio here.
A Review of CapitaLand Ascendas REIT, CapitaLand India Trust, and CapitaLand Integrated Commercial Trust's Q1 FY2024 Business Updates

There are a total of 5 REITs and business trusts listed on the Singapore Exchange that are sponsored by CapitaLand Investments Limited:

  1. CapitaLand Ascendas REIT (SGX:A17U) – Singapore’s first and largest business space and industrial REIT
  2. CapitaLand Ascott Trust (SGX:HMN) – largest lodging trust in Asia Pacific
  3. CapitaLand India Trust (SGX:CY6U) – first Indian property trust in Asia
  4. CapitaLand Integrated Commercial Trust (SGX:C38U) – first and largest REIT listed on the Singapore Exchange
  5. CapitaLand China Trust (SGX:AU8U) – Singapore’s largest China-focused REIT

Among the 5, I’m currently invested in 3, namely CapitaLand Ascendas REIT, CapitaLand India Trust, and CapitaLand Integrated Commercial Trust (you can check out a list of all the Singapore-listed companies I’m invested in here).

In this post, you will find my review of business updates of the 3 CapitaLand REITs I have investments in for Q1 FY2024 ended 31 March 2024, according to the dates of their result releases, as follows: CapitaLand Integrated Commercial Trust (where it has released its business update before market hours on 19 April), CapitaLand Ascendas REIT (where it has released its business update after market hours on 22 April), and then CapitaLand India Trust (where it has released its business update after market hours on 24 April).

Let’s begin:

CapitaLand Integrated Commercial Trust (SGX:C38U) (Results Released on 19 April)

Brief Introduction:

It invests in properties for commercial (including retail and/or office) purposes. Currently, it has 21 properties in Singapore, 2 properties in Frankfurt, Germany, and 3 properties in Sydney, Australia, with a total property value of S$24.5 billion as at 31 December 2023.

Key Financial Figures (Q1 FY2023 vs. Q1 FY2024):

Q1 FY2023Q1 FY2024% Variation
Gross Revenue
(S$’mil)
$388.5m$398.6m+2.6%
Property Operating
Expenses (S$’mil)
$112.2m$104.9m-6.5%
Net Property
Income (S$’mil)
$276.3m$293.7m+6.3%

My Observation: Gross revenue and net property income grew by 2.6% and 6.3% respectively as a result of gross rental income growth (where its rental, office, and integrated properties all saw improvements), coupled with a lower property operating expenses (which fell by 6.5%).

Portfolio Occupancy Profile (Q4 FY2023 vs. Q4 FY2024):

Q4 FY2023Q1 FY2024
Portfolio Occupancy
(Retail)
98.5%98.7%
Portfolio WALE
(by GRI – years) (Retail)
2.0 years2.0 years
Portfolio Occupancy
(Office)
96.7%95.8%
Portfolio WALE
(by GRI – years) (Office)
3.4 years3.9 years
Portfolio Occupancy
(Integrated Development)
98.5%98.9%
Portfolio WALE
(by GRI – years)

(Integrated Development)
4.9 years4.7 years

My Observations: Apart from a slight decline in the occupancy rate of its office properties (down by 0.9 percentage points to 95.8%), its retail and integrated properties saw slight improvements to their occupancy rates. With an occupancy rate of above 95.0% for the 3 different property types, I would say that the REIT’s portfolio occupancy is at a very strong level.

Lease renewals are also very well-spread out over the next couple of years, where, between FY2024 and FY2027, it has about 12% of retail leases and 6% of office leases due for renewal each year. Also, no single tenant contributes more than 5.2% of the REIT’s total gross rental income.

Debt Profile (Q4 FY2023 vs. Q1 FY2024):

Q4 FY2023Q1 FY2024
Aggregate Leverage
(%)
39.9%40.0%
Interest Coverage
Ratio (times)
3.1x3.1x
Average Term to
Debt Maturity (years)
3.9 years3.8 years
Average Cost of
Debt (%)
3.4%3.5%
% of Borrowings Hedged
to Fixed Rates (%)
78%76%

My Observations: On the whole, I’m of the opinion that the REIT’s debt profile is more or less the same as the previous quarter – one positive thing to note is that its interest coverage ratio have remained stable at 3.1x in the quarter under review (it has started its downward decline every single quarter from 4.2x recorded in Q1 FY2022, and it has remained at 3.1x since Q3 FY2023).

In terms of debt maturity, it has 13% of borrowings maturing in the remaining 3 quarters of FY2024, and in the coming financing years (between FY2025 and FY2029), it has an average of about 12-15% of borrowings due for refinancing each year, which is very well-spread out.

CapitaLand Ascendas REIT (SGX:A17U) (Results Released on 22 April 2024)

Brief Introduction:

It invests in tech and logistics properties in developed markets. Currently, it owns 232 properties across 3 segments (business space and life sciences, logistics, and industrial and data centres) in Singapore, the United States, Australia, as well as in the United Kingdom/Europe, with a total investment properties under management at S$16.9 billion as at 31 December 2023.

Portfolio Occupancy Profile (Q4 FY2023 vs. Q1 FY2024):

Q4 FY2023Q1 FY2024
Portfolio Occupancy
(%)
94.2%93.3%
Rental Reversion
(%)
+15.2%+16.9%
Portfolio WALE
(years)
3.9 years3.9 years

My Observations: Compared to the previous quarter, the REIT’s portfolio occupancy weakened slightly to 93.3%, due to a slight decline in the occupancy rates in all of the geographical locations, as follows:

  • Singapore: Down by 0.4 percentage points (pp) from 92.7% in Q4 FY2023 to 92.3% in Q1 FY2024
  • United States: Down by 0.9pp from 90.4% in Q4 FY2023 to 89.5% in Q1 FY2024
  • Australia: Down by 2.1pp from 98.7% in Q4 FY2023 to 96.6% in Q1 FY2024
  • United Kingdom/Europe – Down by 1.8pp from 99.3% to 97.5% in Q1 FY2024

Despite the slight declines, there’s no cause for concern as they are still maintained at above 90% (apart from the occupancy of its properties in the United States, which was slightly below 90%).

A bright spot can be seen in its rental reversion, where it continued to record a double-digit percentage for new and/or renewed leases – attributed by a +16.0% rental reversion for the Singapore leases and a +28.7% rental reversion for the leases in the United States. There are no rental renewals made for leases in Australia and United Kingdom/Europe for the current quarter under review.

Finally, in terms of lease expiry, in the remaining 3 quarters of FY2024, only 9.3% of the leases are due for renewal. Between FY2025 and FY2027, an average of 18.7% of the leases will be due for renewal each year (which I consider to be well-staggered), with 34.6% of the leases due for renewal only in FY2028 or later.

Debt Profile (Q4 FY2023 vs. Q1 FY2024):

Q4 FY2023Q1 FY2024
Aggregate Leverage
(%)
37.9%38.3%
Interest Coverage
Ratio (times)
3.9x3.7x
Average Term to
Debt Maturity (years)
3.4 years3.4 years
Average Cost of
Debt (%)
3.5%3.8%
% of Borrowings Hedged
to Fixed Rates (%)
79.1%82.6%

My Observations: Apart from the REIT having a larger percentage of borrowings hedged to fixed rates (up by another 3.5pp to 82.6%, and in my opinion, it is a very high percentage), the other statistics weakened slightly. However, its aggregate leverage, at 38.3%, continues to remain at a healthy level.

In terms of its debt maturity profile, it is also very well-spread out – apart from 14% of its borrowings due for refinancing in the remaining 3 quarters of FY2024, between FY2025 and FY2025, it has an average of around 14% of borrowings due to financial each year.

Contribution by the top 10 tenants by gross revenue is at 16.7%, with no tenant having a contribution of more than 3.2% – hence there’s no risk of tenant concentration for the REIT.

CapitaLand India Trust (SGX:CY6U) (Results Released on 24 April 2024)

Brief Introduction:

It invests in real estate assets used primarily as business space in India. Currently, its portfolio comprises 9 world-class IT business parks, 1 logistics park, 3 industrial facilities, and 4 data centre developments in the country, with a total assets under management of S$3 billion as at 31 December 2023.

Financial Performance (Q1 FY2023 vs. Q1 FY2024):

Q1 FY2023Q1 FY2024% Variation
Gross Revenue
(S$’mil)
$53.6m$66.9m+24.8%
Net Property
Income (S$’mil)
$42.0m$49.4m+17.6%

My Observations: A decent growth was recorded in its total property income, as well as in its net property income for the 1st quarter.

The jump in its total property income (by about 25% in SGD-terms and 26% in INR-terms) was contributed by higher rental income from existing properties and income contributions from acquisition and development – Block A of ITPH, ITPP-H, Industrial Facility 2 & 3 in Mahindra World City, and BlueRidge 3 Phase 1 in Hinjawadi, Pune.

As a result of an increase in total property expenses, its net property income improved by about 18% in SGD-terms and by about 19% in INR-terms – a pretty impressive result in my opinion.

Portfolio Occupancy Profile (Q4 FY2023 vs. Q1 FY2024):

Q4 FY2023Q1 FY2024
Portfolio Occupancy
(%)
93.0%94.0%
Portfolio WALE
(years)
3.4 years3.4 years

My Observations: Committed occupancy have climbed by a percentage point to 94.0% – with a majority of the properties having a committed occupancy rate of over 90%.

In terms of lease expiry, it is well-spread out – in the remaining 3 quarters of FY2024, it has 12% of leases expiring (however, approximately 40% of the leases are either renewed or highly likely to be renewed), 8% of the leases expiring in FY2025, 18% of the leases expiring each year in FY2026 and FY2027, and the remaining 44% of the leases expiring only in FY2028 or later.

Finally, new/renewed leases were renewed at a positive rental reversion (+5% for ITPB, +8% for CyberVale, +15% for ITPH, +10% for CyberPearl, and +5% for aVance I, Pune). Only ITPC saw a negative rental reversion of -2% – which is due to the expiry of several short-term lease extensions that were concluded at above-market rates.

Debt Profile (Q4 FY2023 vs. Q1 FY2024):

Q4 FY2023Q1 FY2024
Aggregate Leverage
(%)
35.8%37.0%
Interest Coverage
Ratio (times)
2.6x2.6x
Average Cost of
Debt (%)
6.3%6.3%
% of Borrowings Hedged
to Fixed Rates (%)
75%71%

My Observations: Even though the business trust’s aggregate leverage inched up slightly to 37.0, but in my opinion, it is at a healthy level – where it has a debt headroom of about S$982m before it reaches the 50% limit.

Interest coverage ratio and average cost of debt remains the same as the previous quarter at 2.6x and 6.3% respectively.

In terms of debt maturity, in the remaining 3 quarters of FY2024, it has S$188.7m (or 12.8%) of borrowings due for refinancing. Another S$200m (or 13.6%), S$350m (or 23.8%), and S$200m (or 13.6%) of borrowings are due for refinancing in FY2025, FY2026, and FY2027 respectively, with the remaining S$529.9m (or 36.2%) of borrowings due for refinancing only in FY2028 or later – personally, I feel its debt over the next few years are well-spread out.

Closing Thoughts

Here’s a quick recap on the performance of the 3 CapitaLand REITs and business trust:

CapitaLand Integrated Commercial Trust:

  • Gross revenue and net property income saw a single digit percentage increase (by 2.6% and 6.3% respectively) contributed by an improvement in all of its property types (retail, office, and integrated development properties).
  • Debt maturity well-spread out, with aggregate leverage at 40.0%, and approximately 12-15% of borrowings due for refinancing every single year between FY2024 and FY2029. Another point to note is that its interest coverage ratio has remained stable at 3.1x.
  • Occupancy rates remain at a high (with retail properties at 98.7%, office properties at 95.8% and integrated development at 98.9%), with lease expiries very well-spread out over the years (where it has approximately 12% of retail leases and 6% of office leases) due for lease renewal between FY2024 and FY2027.

CapitaLand Ascendas REIT:

  • Slight decline in portfolio occupancy to 93.3%, but despite of that, apart from the occupancy in United States, the other geographical locations (Singapore, Australia, United Kingdom/Europe) have portfolio occupancies of above 90%. Rental reversion was at an impressive +16.9% for new/renewed leases for the quarter.
  • Debt profile weakened slightly, with aggregate leverage inching up by another 0.4pp to 38.3% – but it is still a safe distance to the regulatory limit of 50.0%. On the flip side, the REIT has further improve the percentage of borrowings hedged to fixed rates at 82.6%.

CapitaLand India Trust:

  • Total property income and net property income grew by double-digit percentage points (by 25% and 18% respectively in SGD-terms, and by 26% and 19% respectively in INR-terms) contributed by higher income from existing properties and income contributions from acquisitions and developments.
  • Portfolio occupancy improved by one percentage point to 94.0%, with lease expiries well-spread out, and a positive rental reversion was recorded for most of its properties.
  • Though aggregate leverage climbed by 1.2pp to 37.0%, it is still at a healthy level, with interest coverage and average cost of debt remaining stable at 2.6x and 6.3% respectively.

In my personal opinion, all the 3 CapitaLand REITs and business trusts that I have investments in reported a pretty decent report card: in terms of their financial performances (CapitaLand Integrated Commercial Trust and CapitaLand India Trust provided a snippet of it), they have recorded improvements for the first quarter contributed by existing properties in its portfolio; portfolio occupancy of all 3 of them were very strong at above 90%, with lease expiries well-spread out; finally, their debt profile (in terms of their aggregate leverage) are also at healthy levels of not more than 40.0%.

Finally, as all the CapitaLand REITs pays out a distribution to its unitholders on a half-yearly basis (once when it releases its results in the first half of the year, and another in the 2nd half), there are no distribution payouts declared for the current quarter under review.

With that, I have come to the end of my review of the business updates of CapitaLand Integrated Commercial Trust, CapitaLand Ascendas REIT, as well as CapitaLand India Trust. As always, I hope you have found the contents presented in this post useful. Do take note that all the opinions expressed in this post are purely mine which I’m sharing for educational purposes only. You should always do your own due diligence before you make any investment decisions.

Related Documents

CapitaLand Integrated Commercial Trust:

CapitaLand Ascendas REIT:

CapitaLand India Trust:

Disclaimer: At the time of writing, I am a unitholder of all 3 CapitaLand REITs.

The post A Review of CapitaLand Ascendas REIT, CapitaLand India Trust, and CapitaLand Integrated Commercial Trust's Q1 FY2024 Business Updates first appeared on The Singaporean Investor.

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