CDL Hospitality Trusts - CGS-CIMB Research 2021-03-25: A Faster RevPAR Recovery On The Cards


CDL Hospitality Trusts - A Faster RevPAR Recovery On The Cards

  • We expect a faster RevPAR recovery from FY23F, thanks to the positive development of COVID-19 vaccines. 19% of CDL Hospitality Trusts's AUM could see earlier recovery.
  • CDL Hospitality Trusts's healthy balance sheet to support portfolio expansion and income top-up.
  • Upgrade CDL Hospitality Trusts from Hold to ADD with a target price of S$1.43, implying 1.1x P/BV.

CDLHT's RevPAR improved q-o-q in 4Q20 but remained weak y-o-y in 2H20

  • CDL Hospitality Trusts (CDLHT, SGX:J85)’s Singapore revenue per average room (RevPAR) improved 19% q-o-q in 4Q20, but declined 54% y-o-y in 2H20.
  • The acquisition of W Hotel which is located at Sentosa in mid-2020 helped to boost its overall Singapore RevPAR.
  • Overseas RevPAR remained weak in 2H20 with large y-o-y contractions (down 60-90%) in most markets (Maldives, Germany, Italy and Japan).
  • In 4Q20, q-o-q improvements were seen across all markets.

Near-term weakness remains but recovery could accelerate in FY23

  • We expect CDL Hospitality Trusts’s Singapore and New Zealand units – collectively account for ~86% of FY20 NPI and 73% of end-FY20 asset under management (AUM) – to be supported by isolation business for most of FY21F.
  • CDL Hospitality Trusts's master lease with Australian hotels (12% of FY20 NPI; 2.9% of end-FY20 AUM) will expire in Apr 2021 and likely to be converted into variable rent while a restructuring of its rental agreement with the lessee of its German hotel (3.9% of FY20 NPI, 6.6% of end-FY20 AUM) is ongoing. Fortunately, both Australia and Europe (collectively: 19% of end-FY20 AUM, ~18% of FY20 NPI) may see a quicker RevPAR recovery given the stronger domestic market and relatively high exposure to arrivals from countries which could inoculate 75% of their population in 1.5 years.

Healthy balance sheet to support inorganic growth, income top-up

  • CDL Hospitality Trusts’s gearing remained healthy at 37.5% at end-FY20, with a debt headroom of S$689m (based on 50% gearing limit). This should support its strategy of expanding its portfolio.
  • CDL Hospitality Trusts's end-FY20 cash reserve of S$131m and committed revolving credit facilities amounting to S$301.9m could support 3-4 years of operating expenses.

Upgrade CDLHT from Hold to ADD at a higher DDM-based target price of S$1.43

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | 2021-03-25
SGX Stock Analyst Report ADD UPGRADE HOLD 1.43 UP 1.240