CDL Hospitality Trusts - CGS-CIMB Research 2020-07-29: Gradual Recovery Ahead

CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Gradual Recovery Ahead

CDL Hospitality Trusts (SGX:J85)’s 1HFY20 DPU of 1.51 Scts (-63.7% y-o-y) was in-line at 45% of our FY20F DPU. 1HFY20 revenue and NPI declined by 44.5% and 56% y-o-y to S$52m and S$29.7m respectively.
With the exception of the New Zealand and Singapore hotels, most of CDL Hospitality Trusts’s properties were either closed on a temporary basis or operating at low occupancies since Mar 2020. 1HFY20 RevPAR across all countries declined substantially by 30% to 80% y-o-y.
CDL Hospitality Trusts did not declare a capital distribution in 1HFY20 but it is likely to declare some at the year-end as the situation improves.

New Zealand (-32.2% y-o-y in 1HFY20) and Singapore (-49.2%) hotels’ RevPARs were more resilient than other countries. Occupancies of New Zealand and Singapore hotels were bolstered by isolation demand, and foreign workers in the case of Singapore. Excluding out-of-order rooms, occupancy of Singapore hotels was high at 91% in 2Q and 72% in 1H20.
The relatively better performance from Singapore and New Zealand helped to offset NPI losses from other countries.
CDL Hospitality Trusts recognised a collective impairment of S$3.4m in 1H20 against rental receivables due for Pullman Munich in Germany and Hotel Cerrentani Firenze in Italy.

For the first 27 days of Jul 20, RevPAR for Singapore hotels declined 61.9% y-o-y. The occupancies of the hotels in Singapore and New Zealand are likely to be supported by demand from stay-home-notice and foreign workers in 3Q and possibly going into 4Q. Singapore, New Zealand and Australia which are on master leases accounted for 62% of its 1HFY20 revenue and we see this portion of revenue improving going forward.
In the UK, Hilton Cambridge reopened in early-Jul, while Lowry Hotel is expected to reopen in Aug. We understand that the bulk of the demand for these two hotels is domestically driven. Hotel Cerretani Firenze in Italy is also expected to reopen in mid-Aug 2020. Maldives has also reopened its borders in mid-Jul, which will bode well for Angsana Velavaru.
With the re-openings, we expect the operating metrics of these four hotels, which accounted for c.17% of 1HFY20 revenue, to improve going forward.

We maintain our FY20-22F DPU and reiterate ADD call on the stock. Barring the occurrence of a second COVID-19 wave, we believe 2Q could be the worst this year.
CDL Hospitality Trusts is trading at 0.7x P/BV which has likely priced in the impact from COVID-19.
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.
Upside/downside risks include stronger-/weaker-than-expected recovery from COVID-19.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-29

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