CDL Hospitality Trusts - DBS Research 2016-01-06: Cheap as chips

CDL Hospitality Trusts - DBS Research 2016-01-06: Cheap as chips CDL HOSPITALITY TRUSTS J85.SI 

CDL Hospitality Trusts - Cheap as chips 

Negatives largely priced in. 

  • We maintain our BUY call with a revised TP of S$1.54
  • While CDREIT faces several challenges in 2016 including: 
    1.  excess new room supply in Singapore and 
    2.  potential impact on its Maldives operations due to the recent imposition of a state of emergency, 
    we believe this has largely been priced in. 
  • The implied price per key for CDREIT’s Singapore portfolio stands at c.S$440k which is below replacement cost of c.S$700k, and recent market transactions at above S$650k. 

Cheapest REIT to ride the eventual upturn. 

  • CDREIT’s implied price per key of S$455k is below that of other hospitality REITs (S$650k-1m). Thus, CDREIT offers the cheapest exposure to the eventual upturn in the Singapore hospitality market. 
  • With no new land released for new hotels over the past two years, supply pressures should ease from 2017 onwards. 

Optimising portfolio. 

  • We expect additional upside to CDREIT’s earnings as it optimises its portfolio. 
  • At the end FY16, the initial 10-year lease at Rendezvous Grand Hotel Auckland (c.7% of 9M15 NPI) ends, which presents an opportunity to appoint another operator or renegotiate better lease terms. This is on top AEI’s being undertaken at Grand Copthorne Waterfront Hotel and M Hotel in Singapore. 


  • Given weaker than expected 3Q15 performance, concentration of new supply in Singapore near CDREIT’s properties in 2016 and potential impact on its Maldives operations due to the recent declaration of a state of emergency, we cut our FY15- 17F DPU by 11-15% and lowered our DCF based TP to S$1.54 from S$1.65. 

Key Risks to Our View: 

Weaker-than-expected demand supply outlook in Singapore. 

  • The key risk to our view is a weaker than expected demand-supply outlook for the Singapore hospitality market, resulting in a lower RevPAR performance compared to our estimates. This may be due to a decline in tourist arrivals into Singapore.

Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | 2016-01-06
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.54 Down 1.65