CDL Hospitality Trusts - UOB Kay Hian 2021-04-30: Not Out Of The Woods Yet


CDL Hospitality Trusts - Not Out Of The Woods Yet

  • CDL Hospitality Trusts’s Singapore portfolio saw RevPAR declines on a q-o-q basis with weaker staycation demand following the peak 4Q20 period. Government-supported isolation hotel stays continue to be well supported in Singapore and New Zealand while the Maldives saw a decent occupancy as it reopened its borders to tourists. Other overseas locations in Europe and Japan continue to be hard hit.
  • Maintain HOLD on CDL Hospitality Trusts with a target price of S$1.24.

CDL Hospitality Trust (CDREIT) provided a business update for 1Q21.

Overall NPI declined 19% q-o-q.

  • Travel restrictions and lockdown measures continue to impact CDL Hospitality Trusts (SGX:J85)’s portfolio recovery. Singapore saw weaker contribution while New Zealand and the Maldives saw stronger contributions y-o-y off a low base. On a y-o-y basis, CDL Hospitality Trusts’s revenue and NPI increased marginally y-o-y by 2.8% and 1.0% respectively.
  • Singapore portfolio RevPAR declined 25% q-o-q, with a weaker staycation demand following the year-end festive period. Occupancy was weaker at 70% (vs 2H20: 86%). Market demand comprised primarily government business for isolation purposes, staycations and corporate project group. The group’s four out of six Singapore hotels continue to be used for isolation purposes with contracts set to remain in place till 2Q21.
  • Average room rates continued to remain under pressure, while weaker occupancy on weekdays as opposed to weekend staycations is set to continue. The bright spot would be the relaunch of the travel bubble with Hong Kong, set to take place by end-May 21, as well as the resumption of MICE and wedding events from end-Apr 21.

Singapore outlook.

  • The staycation business could still have some room to grow from a 1Q21 lull. Domestic tourism campaigns will provide some support, including a S$45m marketing campaign which includes promoting hotel staycation deals packaged with tours or activities.
  • As at 28 Mar 21, approximately 75% of adult Singaporeans had yet to utilise their SingapoRediscovers vouchers, which will expire on 30 Jun 21. Two of CDL Hospitality Trusts’s hotels that are taking staycation bookings will continue to develop attractive promotions to capture a tion business. The Singapore portfolio constitutes 66% and 62% of CDL Hospitality Trusts’s 2020 AUM and NPI respectively.

The Maldives: Decent quarter amid reopening.

  • Since reopening its borders, international visitor arrivals have picked up in Dec 20, with growth continuing into Mar 21 with an 83.8% y-o-y surge in March arrivals; note that 1Q is seasonally stronger. NPI contribution reversed to a positive territory compared with 2H20, while management noted that occupancy levels were close to 50%.
  • Raffles Maldives Meradhoo saw positive results from its efforts to attract guests from Eastern Europe. However, the company was still cautious on the pace of recovery as outbound Chinese tourists have yet to return to a large extent.

New Zealand: Steady improvement.

  • RevPAR increased 5% q-o-q as Grand Millennium Auckland experienced stable occupancy as it continued to serve as a managed isolation facility. The higher NPI contribution y-o-y was partly due to a low base in 1Q20 where only base rent was recognised.
  • Looking forward, the Australia-New Zealand travel bubble that commenced in mid-Apr 21 could result in higher arrivals from Australia.

Australia: Lower contribution from divestment.

  • NPI contribution was lower (-45% y-o-y), due to the absence of contribution from Novotel Brisbane which was divested in Oct 20. The group has two Perth Hotels left, which will be exposed to trading conditions due to the absence of fixed rent following the expiry of leases in Apr 21. However, demand may be bolstered by the strong resources and mining sector in Western Australia.

Japan: Challenging outlook.

  • RevPAR declined 13% q-o-q in 1Q21 as demand from both domestic leisure visitation and corporate travel was significantly curtailed following the country’s state of emergency.

Europe: Hard hit by new lockdowns.

  • Across the board, European assets faced stricter restrictions with the resurgence in COVID-19 cases. UK RevPAR declined 67% q-o-q in 1Q21, while Germany RevPAR declined 20% q-o-q.

Gearing of 39.1% (+1.6ppt q-o-q).

  • CDL Hospitality Trusts has about S$128.5m cash on its balance sheet and S$266.5m of committed unsecured revolving credit facilities.


  • We make some housekeeping changes, lowering our DPU forecast of CDL Hospitality Trusts by 9-15% for 2021-22F, with 2023F DPU of 7.8 cents, For 2021-22F, we expect a slower RevPAR recovery given milder occupancy rates for Singapore.



  • Lifting of travel restrictions in Singapore, and a reduction in COVID-19 infection rates bally.

Lucas Teng UOB Kay Hian Research | Jonathan KOH CFA UOB Kay Hian | https://research.uobkayhian.com/ 2021-04-30
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