CDL Hospitality Trusts - Maybank Kim Eng 2021-04-30: Not Clear Skies

CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Not Clear Skies

CDL Hospitality Trusts (SGX:J85)’s 1Q21 NPI, up 1.0% y-o-y, but down 19.1% q-o-q, saw the performance of its properties in Maldives and New Zealand backed by stronger RevPARs. Demand recovery is weak, and the outlook remains uncertain with low DPU visibility, against the backdrop of an uneven pace of vaccine rollouts and easing borders.
We maintain our estimates and DDM-based S$1.30 target price (COE: 6.5%, LTG: 2.0%).
We prefer Ascott Residence Trust (SGX:HMN) (BUY, target price S$1.25) for its long-stay assets and upside from capital distributions amid slower DPU growth, and Far East Hospitality Trust (SGX:Q5T) (BUY, target price S$0.70), for its Singapore-focused AUM and master lease contributions.

CDL Hospitality Trusts's 1Q21 revenue and NPI for its Singapore hotels (excluding W) fell ~38% y-o-y and ~31% y-o-y, improving from –c.68% y-o-y and –c.49% y-o-y in 4Q20.
Occupancy for all six hotels rose y-o-y to 69.9% (from 54.0%) in 1Q21, mainly helped by government contracts for isolation activity (likely to see extension into 3Q21), as well as staycation demand and corporate project groups.
RevPAR declined by 34.3% y-o-y, from a 49.2% y-o-y fall in ADR, versus -59.7% y-o-y and -60.1% y-o-y respectively in 2H20, and in line with expectations.

CDL Hospitality Trusts's overseas hotels were weaker y-o-y, achieving a similar trend, with better NPIs in
- New Zealand, off from a low base with border closures in 1Q20, helped by an extension of the government’s managed isolation business, and
- Maldives, as RevPAR jumped 64.1% y-o-y with demand from Eastern European tourists.
NPIs for its Australian hotels at –c.45% y-o-y was due to the Novotel Brisbane divestment, but will remains cushioned by the fixed rent structure from the renewal of its master leases with Accor.

CDL Hospitality Trusts's leverage increased q-o-q to 39.1% (from 37.5%) as its interest coverage rose from 2.2x to 2.4x, low versus history and reflecting the weaker EBITDA.
In spite of the S$595m debt headroom (at 50% leverage limit), we think that near term deals for CDL Hospitality Trusts are unlikely, given wide differences in buyer-seller expectations, and also uncertainty on the recovery trajectory.
See

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-04-30

SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.30 SAME 1.30