CDL Hospitality Trusts - Maybank Kim Eng 2020-07-29: Slow Reopening, Low Visibility

CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Slow Reopening, Low Visibility

CDL Hospitality Trusts (SGX:J85)’s 1H20 DPU, -64% y-o-y and -69% HoH, reflects challenging macros, with its overseas properties temporarily closed or operating at significantly lower occupancies. We see a slow DPU recovery into 2H with a reopening of its hotels in Italy, Maldives and the UK, while the transient demand from government-related businesses supporting its Singapore and New Zealand occupancies will likely ease off in 4Q.
CDL Hospitality Trusts' balance sheet remains sound at 37.1% leverage with SGD0.8m debt headroom. We maintain our forecasts and SGD0.95 DDM-based Target Price (COE: 10.3%, LTG: 2.0%).

While we see improving fundamentals against a gradual pick-up of cross-border travel, demand visibility into FY21 remains weak. We prefer Ascott Residence Trust (SGX:HMN) (BUY, Target Price SGD1.05, see report: Ascott Residence Trust - Maybank Kim Eng 2020-07-28: Longing For Long-stays) for its diversified portfolio, long-stay focused assets, and upside from capital distributions amid slower DPU growth.

CDL Hospitality Trusts' revenue and NPI for its Singapore hotels fell 45.0% y-o-y and 48.7% y-o-y in 1H20 due to the impact from the pandemic since end-Jan 2020. RevPAR was down 49.2% y-o-y on lower ARR (-36.1% y-o-y), while occupancy declined by 17.6ppts to 68.2%. This was supported by demand for dedicated facilities for isolation purposes and foreign (Malaysian) workers affected by border closures, which will likely ease off in 4Q20.
W Hotel, acquired in Jul has seen 50% weekend occupancy since staycations were approved, and should improve further towards the year-end.

CDL Hospitality Trusts' NPIs decreased in:
1. New Zealand (by 34.4% y-o-y) with the government’s managed isolation business in 2Q20 cushioning the impact from border closures (since 19 Mar) and a country-wide lockdown,
2. Japan (by 84.4% y-o-y) with a ban on foreign travellers since Apr,
3. UK, with mandatory closures of all hotels from 24 Mar as part of lockdown measures, and
4. Germany and Italy, where SGD3.4m in impairment charges against rental receivables were recognised.
The NPI of its Australian hotels at -4.1% HoH were largely insulated by the fixed rent structure from its master leases (till end-Apr 2021).
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.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-07-29

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