CapitaLand Ascendas REIT - Maybank Research 2022-10-06: Front Runner In The ESG Race Among Industrial S-REITs

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CAPITALAND ASCENDAS REIT (SGX:A17U)

CapitaLand Ascendas REIT - Front Runner In The ESG Race Among Industrial S-REITs

• Under our expanded ESG 2.0 scoring, CapitaLand Ascendas REIT attains an above-average score of 67 - the highest among industrial S-REITs.
• CapitaLand Ascendas REIT has set ambitious targets validated by the Science Based Targets initiative, and well executed on its green financing and green certification goals. Disclosure on Scope 3 emissions and further improvements in board diversity could drive a higher score in our view.
• New-economy assets of S$13.4b (81% of AUM) are set to underpin CapitaLand Ascendas REIT’s continued growth trajectory.

ESG in the right direction

• We note CapitaLand Ascendas REIT (SGX:A17U)’s consistent improvements in sustainability metrics. CapitaLand Ascendas REIT has targeted to achieve a green rating for all owned and managed assets by 2030, and achieved a ~47%/30% in certifying managed/owned GFA by end-2021.
• In line with CapitaLand’s 2030 Sustainability Master Plan, CapitaLand Ascendas REIT is set to reduce Scope 1 and 2 GHG emissions by 78% by 2030 (vs. 2008 baseline), of which 54% has been realized.
• Nonetheless, further disclosure in Scope 3 GHG emissions from tenant energy consumption and third-party managed assets could help drive a higher score.

Green financing instruments in its toolkit

• CapitaLand Ascendas REIT stands out to us as a green-financing champion among industrial S-REITs, with ~S$1.2b (~19% of its total borrowings of S$6389m) funded via instruments such as green bonds, green loans and green perps in FY21. Its green financing instruments are subject to conditions that either limit loan proceeds to fund only green projects, or tag margins to CapitaLand Ascendas REIT’s ESG performance including ratings.
• Notably, performance on targets such as green certification, renewable energy and green financing forms part of management’s remuneration appraisal.

Strong balance sheet underpins growth

• CapitaLand Ascendas REIT has a solid balance sheet prudently managed with ~36.7% leverage, and ~2.1% cost of borrowing as of 1H22, after the addition of seven US logistics properties (for S$133.2m at 5.3% NPI yield).
• CapitaLand Ascendas REIT acquired 1 Buroh Lane cold storage in 3Q22 (for S$191.9m at 7.0% NPI yield). We believe growth is well supported by its continued AUM expansion.
• See
  • CapitaLand Ascendas REIT's Share Price,
  • CapitaLand Ascendas REIT's Target Price,
  • CapitaLand Ascendas REIT's Analyst Reports,
  • CapitaLand Ascendas REIT's Dividend History,
  • CapitaLand Ascendas REIT's Announcements,
  • CapitaLand Ascendas REIT's Latest News.
• Maintain BUY recommendation on CapitaLand Ascendas REIT with DDM-based target price of S$3.50 (COE: 6.2%, LTG: 2.0%).

Read also ESG assessment reports of other industrial S-REITs:

• ESR-LOGOS REIT - Maybank Research 2022-10-06: Steady Progress, New-Economy Play With Low ESG Risk.
• Mapletree Industrial Trust - Maybank Research 2022-10-06: Improving Fundamentals, Remains Focused On ESG.
• Mapletree Logistics Trust - Maybank Research 2022-10-06: Riding The Renewables Wave ~ Logistics Play With An ESG Touch.

Li Jialin Maybank Research | https://www.maybank-ke.com.sg/ 2022-10-06

SGX Stock Analyst Report BUY MAINTAIN BUY 3.500 SAME 3.500