To The Moon

CLAR reported a 4.3% increase in 2H22 DPU to 7.93 cents, due to a 7.1% YoY increase in revenue, offset by higher utility expenses and increased funding costs. Not too bad!

FY22 revenue grew by 10.3% YoY to S$1,352.7 million, thanks to the full contribution of the newly acquired 11 European data centers, the remaining stake in Galaxis, and 11 logistics assets in Chicago. CLAR also completed $223 million worth of new acquisitions and the redevelopment of UBIX building in 2022. Despite these gains, divestment of assets in Australia offset the growth. Higher utility costs, which rose 64% YoY, impacted the NPI margin as well.

The portfolio occupancy reached a record 94.6% with higher occupancy in Singapore (+190bps to 92.1%) and Australia (+20bps to 99.4%) compensating for weaker occupancy in the US. Moreover, FY22 rental reversions came in strongly at 8.0% YoY! CLAR expects the rental reversion momentum to continue into FY23, with logistics driving the increase.

The Singapore portfolio occupancy increased q-o-q to 92.1%, with positive rental reversion of 7%. CLAR has 25.6% of leases to be renewed in Singapore in FY23F, mainly in the industrial and data center, business space, and life sciences segments. The Australia portfolio is also very resilient, with occupancy increasing to 99.4% due to positive leasing momentum for logistics spaces in Sydney. CLAR has 16.4% and 21.8% of leases to be re-contracted in FY23-24F, mainly in logistics spaces in Sydney and Brisbane.

The US portfolio occupancy slipped slightly to 94% at the end of FY22, due to lower occupancies in its business space portfolio. However, it experienced strong rental reversions of +16.9%/+45.7% for its business and logistics spaces in FY22. CLAR has 9.2%/15.9% of leases to be renewed in FY23-24F. The UK/Europe portfolio occupancy is stable at 99.4%, with only 9.4%/14.2% of leases expiring in FY23-24F.

On the portfolio valuation front, CLAR saw a S$73.8 million revaluation gain in FY22 due to the completion of development properties, but a 1.1% decline in portfolio value on a same-store basis. Singapore cap rates compressed by 30 basis points, while Australia and the UK expanded by 105 and 69 basis points respectively. As a result, the gearing ratio dropped from 36.7% to 36.3% at the end of FY22. 79.4% of debt was on fixed rates and the all-in cost of debt rose from 2.2% to 2.5% as of December 2022.

Due to higher capital costs, CLAR is selective in its inorganic growth opportunities and aims for a higher yield of 6% to 7% for acquisitions, with data centers in the UK and Europe looking attractive following recent cap rate expansion of around 60 basis points. US business parks are another area where CLAR sees potential acquisition opportunities. Currently, CLAR is investing S$617 million in redevelopments and AEI.

Overall, I think that CLAR's performance remains strong and surpasses expectations! Despite increased Opex and financing costs, CLAR continues to report growth in DPU, unlike many of its peers! Effective portfolio management and asset improvement initiatives have led to increased returns from properties. The exceptional quality of CLAR's portfolio has contributed to the improvement in occupancy rates and significant positive rental reversions. With the anticipation of continued positive rental reversions in FY23, CLAR’s DPU are expected to continue their upward trend!

@TigerStars @Daily_Discussion