CapitaLand Ascott Trust
Price target: CGS International ‘add’ $1.17
Big beneficiary of concert fever
The string of performances by Taylor Swift and Coldplay is a “gift that keeps on giving” for CapitaLand Ascott Trust (CLAS), which runs a network of properties in cities where these concerts will be held, write CGS International analysts Lock Mun Yee and Natalie Ong in their April 4 note.
Lock and Ong, citing data from Smith Travel Research, note that revenue per available room (RevPar) for the Swift concert days rose 60%, 50%, 120% and 40% y-o-y for Singapore, Tokyo, Melbourne and Sydney.
In contrast, on days without concerts, the cities enjoyed RevPar increases of 12%, 40%, 10% and 15%, the analysts say, as they reiterate their “add” call.
Singapore, for one, is likely to enjoy a 21% RevPar increase for the whole of March to $255, when Swift held her six concerts.
Out of the 46 cities where CLAS operates, Swift is performing in 10 of these cities and Coldplay in six of these cities, according to Lock and Ong.
“We deem properties located within a 40-minute commute to the respective Swift and Coldplay concert venues as concert beneficiaries, accounting for 34% and 18% of CLAS’s total room inventory as of December 2023, making CLAS a bigger beneficiary of concert fever than we originally thought,” they write.
The analysts have revised their RevPAR growth forecast in FY2024 ending December for its major markets Australia, France, the UK and Ireland from 5%–6% to 7%–8%. This translates into $1.3 million, or a 0.3% uplift in gross profit for the current FY2024.
“While events and concerts are ad hoc in nature, Swift’s and Coldplay’s tours highlight the quality of CLAS’s portfolio and investment strategy, which focuses on prime locations in key gateway cities.
“We believe these cities will not only benefit from business and leisure travel demand, but the locations of CLAS’s assets would also allow them to capture upside from large Mice and entertainment events typically held in major cities,” they add.
At current levels, CLAS is trading at –0.6 standard deviations and gives an “attractive” yield of 6.5%.
However, they have trimmed their target price from $1.29 to $1.17, no thanks to unfavourable currency movements assumed, plus delay in the estimated redevelopment of key property Liang Court as well as income foregone from the divestment of another property Citadines Mount Sophia.
“CLAS is our top sector pick as its diversified portfolio provides both stability and upside exposure to the hospitality sector while offering portfolio reconstitution opportunities,” the analysts add.
Potential re-rating catalysts include accretive acquisitions or divestments and stronger-than-forecast RevPAR.
On the other hand, downside risks include lower-than-forecast leisure and corporate travel demand, affecting CLAS’s occupancy and room rates. —