CDL Hospitality Trusts - OCBC Investment 2018-08-13: Take A Breather…

CDL Hospitality Trusts - OCBC Investment Research 2018-08-13: Take A Breather… CDL HOSPITALITY TRUSTS SGX:J85

CDL Hospitality Trusts - Take A Breather…

  • Down 9.1% since our downgrade.
  • Unit prices now more reasonable…
  • But not yet attractive as at 10 Aug.

Down 9.1% since our SELL call

SG: Expecting a more robust RevPAR pickup in 2019

  • As mentioned in our last report, we continue to believe CDLHT’s SG-heavy portfolio remains well-poised to ride the hospitality upcycle. However, we expect to see much more muted DPU growth in the next half-year with a more robust pick-up in SG RevPAR arriving only in FY19. 
  • When we take a look at peers, we believe Far East Hospitality Trust (FEHT) will outperform operationally
    1. given that its hotel assets operate predominantly within the mid-tier segment (versus CDLHT’s higher-end assets) and
    2. given that FEHT had a rather low base in FY17.
  • Recall that for 2Q18, FEHT posted a 3-4% y-o-y RevPAR growth for its hotel portfolio (excluding Oasis Hotel Downtown), as compared to the -0.9% RevPAR growth posted by CDLHT’s SG portfolio and the -0.5% growth posted by OUE Hospitality Trust’s Mandarin Orchard Singapore.

~ SGinvestors.io ~ Where SG investors share

Not yet attractive, but now at a more reasonable unit price…

  • Looking at the rest of the portfolio, we also expect CDLHT’s New Zealand and Maldives assets to be a drag in 2H18 – the former because of its high base in FY17 and the latter given that commencement of upgrading works for Dhevanafushi Maldives are expected to last till its re-opening in 4Q18.
  • Our forecasts remain unchanged since our last update. As of 10 Aug’s close, CDLHT is trading at a 6.4% FY18F yield, or ~0.6 std deviation below its 5 year mean.
  • We see a more reasonable risk-reward for the REIT as at 10 Aug, while not yet attractive. We upgrade CDLHT from Sell to HOLD with an unchanged fair value of S$1.42. 

Deborah Ong OCBC Investment Research | https://www.iocbc.com/ 2018-08-13
SGX Stock Analyst Report HOLD Upgrade SELL 1.420 Same 1.420