CDL HOSPITALITY TRUSTS (SGX:J85)
CDL Hospitality Trusts - Weak Results But Some Sequential Recovery
- Inorganic contribution from W Hotel.
- NPI and RevPAR improved q-o-q.
- Government contracts for SG hotels likely to taper off in 4Q.
Mild sequential recovery in 3Q20
- CDL Hospitality Trusts (SGX:J85)’s 3QFY20 results remained soft, but we saw a sequential improvement this quarter on the back of easing travel restrictions, reopening of temporarily closed hotels, continued demand from government for isolation business and bookings from foreign workers affected by border closures.
- CDL Hospitality Trusts's 3QFY20 revenue dropped 38.7% y-o-y to S$30.1m (+58.2% q-o-q) while NPI fell 57.4% y-o-y to S$15.2m (+49.4% q-o-q). All of CDL Hospitality Trusts’s hotels with the exception of Raffles Maldives Meradhoo which were closed in 1H have reopened in 3Q.
Resumption of staycation benefitted W Hotel
- For Singapore (excluding W Hotel), Rev PAR fell 60.9% y-o-y in 3QFY20, but improved 9.3% q-o-q. Despite the high occupancy of 92.4% (+1.6 ppt y-o-y) for SG hotels, aided by bulk-booking by government for isolation, ADR fell 61.5% y-o-y. Including W Hotel, Rev PAR would have fallen 58.2% y-o-y.
- While W Hotel has been receiving particularly strong staycation demand, management is likely to cap the occupancy rate at ~60% due to social distancing restrictions.
Overseas hotels were generally weaker, except for Australia and New Zealand
- CDL Hospitality Trusts’s RevPAR performance in 3Q remained weak with the exception of hotels in New Zealand which reported a slightly positive RevPAR of +0.4% y-o-y in 3Q, helped by government’s isolation business. Hotels in Australia were essentially on fixed rent structure. NPI contribution from Australia hotels grew 3.5% y-o-y in 3Q due to stronger AUD.
- 3Q RevPAR for CDL Hospitality Trusts’s remaining overseas market fell sharply, despite some recovery q-o-q. Maldives, Italy and Germany were the worst performing countries.
Divestment of Novotel Brisbane
- As at 30 Sep 2020, CDL Hospitality Trusts’s gearing stood at 36.7% with a debt headroom of S$809m, assuming a gearing limit of 50%. CDL Hospitality Trusts completed the divestment of Novotel Brisbane for a total consideration of ~S$66.4m. Post-transaction, CDL Hospitality Trusts’s gearing and liquidity could be improved further.
- 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.
- While we see a sequential recovery in 3Q, the resurgence of COVID-19 cases in UK and Europe could weigh on the recovery pace and may lead to another temporary closure of hotels in these regions to minimise costs.
- We revise our CDL Hospitality Trusts's DPU forecasts for FY20/21F down by 7%/4% to reflect the divestment of Novotel Brisbane and resurgence of COVID-19 cases in UK/Europe but expect a more robust recovery from FY22 given the expectation that a vaccine will be widely available by mid-2021.
- After adjustments, our fair value estimate increases from S$0.92 to S$0.98.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2020-11-03
SGX Stock
Analyst Report
0.98
UP
0.920
