CDL Hospitality Trusts - CGS-CIMB Research 2021-07-31: Look Forward To A Firmer Recovery

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CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Look Forward To A Firmer Recovery

• CDLHT’s 1H21 DPU of S$0.0122 (-19.2% y-o-y) came in below expectations.
• 1H21 recovery remains uneven but expecting a more sustainable recovery.
• We believe market had expected the recovery volatility. Reiterate ADD.

CDLHT's 1H21 DPU came in below expectations

• CDL Hospitality Trusts (CDLHT, SGX:J85)’s 1H21 revenue increased 27% y-o-y to S$66.2m, while NPI increased 24% y-o-y to S$37m. However, this did not translate into higher distribution (-18.5% y-o-y) as:
  1. the increase of UK and Raffles Maldives NPI (S$5.4m) did not result in a similar increase in distribution due to the low base effect in 1H20 and below-NPI expenses,
  2. lower distribution received vs accounting rent recognised post-restructuring of the Germany and Italy hotels, and
  3. the absence of the one-off contribution of S$0.8m from the dissolution of the management corporation strata title (MCST) relating to the Novotel Singapore Clarke Quay (NCQ) divestment in 1H20.
• Consequently, while NPI was in line, at 50.8% of our FY21F forecast, CDLHT's 1HFY21 DPU of S$0.0122 (-19.2% y-o-y) came in below, at 23% and 24% of our and consensus’ full-year forecasts, respectively.

Recovery across countries remains uneven

• Recovery across businesses in different countries remained uneven, with performances highly dependent on the COVID-19 situation in the respective countries. Singapore, Australia, Japan, UK, Germany and Italy’s 2Q21 RevPAR were stronger q-o-q. Maldives and New Zealand, on the other hand, reported weaker q-o-q RevPAR.
• In 1H21, Singapore remained the top contributor of NPI (44%), followed by New Zealand (26.5%) and Maldives (9.3%). Singapore’s RevPAR improved 13% q-o-q in 2Q21 due to higher room rate and occupancy, mainly driven by staycation demand. We believe Singapore will continue to be supported by government contracts and master lease income in 2021F, with upside coming from W Hotel, which is open for staycations.
• New Zealand’s 2Q21 RevPAR (-23% q-o-q) was affected by a lower number of rooms required for isolation, but this should improve as the country opens its borders and more residents return.
• Maldives’s RevPAR dropped from US$313 in 1Q21 to US$151 in 2Q21 due to the temporary suspension of entry for tourists from South Asian countries from 13 May 21. However, this has been lifted since 15 Jul 21.
• Europe, which made up 11.8% of 1H21 NPI, reported stronger RevPAR q-o-q in 2Q21, following easing restrictions.

Reiterate ADD, at a lower DDM-based target price of S$1.32

• We reduce our FY21-23F DPU forecast for CDLHT by 15-23%, factoring in mainly retained income and higher expenses. CDLHT remains committed to top up income in 2H21. Hence, we maintain our income top-up forecast of S$20m for FY21F (same level as last year).
• See
  • CDL Hospitality Trusts's Share Price,
  • CDL Hospitality Trusts's Target Price,
  • CDL Hospitality Trusts's Analyst Reports,
  • CDL Hospitality Trusts's Dividend History,
  • CDL Hospitality Trusts's Announcements,
  • CDL Hospitality Trusts's Latest News.
• Despite the disappointing 1H21, we believe market had expected the recovery volatility. We expect more sustainable recovery ahead given the increasing vaccination rate. The expanded investment mandate is another catalyst should CDLHT make an acquisition.
• Downside risk is slower recovery from COVID-19 and lower income top-up.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-07-31

SGX Stock Analyst Report ADD MAINTAIN ADD 1.32 DOWN 1.430