CDL Hospitality Trusts - OCBC Investment 2020-02-19: Beneficiary Of Relief Package

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CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Beneficiary Of Relief Package

• Relief package was announced to support hospitality sector.
• To provide job and cash-flow support.
• Likely to carry out more AEIs.

S$4b Stabilisation and Support Package to support the economy

• The government announced a S$4b Stabilisation and Support Package during the Singapore Budget 2020 yesterday to help businesses cope with the near-term economic headwinds from the COVID-19 outbreak. It was highlighted in the speech that additional support will be provided to the most directly and adversely impacted sectors, namely the tourism, aviation, retail, food services and point-to-point transport services.

Provision of tax rebates and a temporary bridging loan programme

• For businesses in the hospitality sector, support measures mainly come in the form of a property tax rebate. A property tax rebate of 30% will be granted for the accommodation and function room components of licensed hotels and serviced apartments, as well as prescribed MICE venues, for year 2020.
• In addition, a new temporary bridging loan programme will be introduced for a year to alleviate the short-term cash flow and operating costs pressures of tourism sector enterprises (e.g. licensed hotel operators, attraction operators and licensed travel agents etc.). The loan limit per company will be $1m with the government taking on 80% of the risk of the loan and an interest rate capped at 5%.
• Moreover, the government will enhance a series of tax treatments under corporate tax system for a year to allow companies to write-down their investments in PPE, and renovation and refurbishment at a faster rate.

CDLHT will benefit from additional support measures

• We see these support measures as positive for CDL Hospitality Trusts (SGX:J85). A 30% reduction in property tax is estimated to have a positive ~2% impact on FY20 NPI and DPS, which would help to cushion the slowdown in its operations. CDL Hospitality Trusts could also take advantage of the lull period to upgrade the assets and enjoy the benefit of a faster write-down to have more cash on hand.
• Management shared that CDL Hospitality Trusts is currently carrying out AEIs at Copthorne King’s Hotel in phases and is also evaluating other Singapore hotels.
• We maintain our fair value of S$1.62. See CDL Hospitality Trusts Share Price; CDL Hospitality Trusts Target Price; CDL Hospitality Trusts Analyst Reports; CDL Hospitality Trusts Dividend History; CDL Hospitality Trusts Announcements; CDL Hospitality Trusts Latest News.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-02-19

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