CDL HOSPITALITY TRUSTS (SGX:J85)
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
- CDL Hospitality Trusts has 76% AUM exposure to countries with low COVID-19 infection rate (Singapore, New Zealand, Australia) but 66% come from Singapore which has low domestic demand.
- CDL Hospitality Trusts has
- ~16% AUM exposure to Europe which we expect will recover faster vs other countries due to the strong domestic market and fast inoculation rate in 1.5 years, and
- 3% AUM in Australia which has low infection rate and had a relatively high proportion of tourist arrivals in 2019 (30% of total) from countries which could inoculate 75% of their population in 1.5 years.
- We cut our CDL Hospitality Trusts's FY21-22F DPU forecast but raise FY23F DPU forecast, factoring in a slower RevPAR recovery in 2021F but an acceleration from end-2022F. We also assume a higher income distribution for FY21F and raise terminal growth assumption as we expect a faster earnings recovery.
- 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.
- Key upside/ downside risk: Faster/ slower-than-expected recovery from COVID-19.
EING Kar Mei CFA
CGS-CIMB Research
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LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-03-25
SGX Stock
Analyst Report
1.43
UP
1.240
