CDL Hospitality Trusts - OCBC Investment 2021-08-02: Recover Gradually


CDL Hospitality Trusts - Recover Gradually

  • CDL Hospitality Trusts's 1H21 DPU fell 19.2% y-o-y.
  • Expansion of investment mandate.
  • Remains committed for capital top-ups for FY21.

CDL Hospitality Trusts's 1H21 results below expectations

  • CDL Hospitality Trusts (CDLHT, SGX:J85)'s 1H21 revenue and net property income (NPI) grew 27.2% and 24.4% y-o-y to S$66.2m and S$37.0m respectively.
  • Despite an increase in NPI, total distribution fell 18.5% y-o-y to S$15.0m despite a low base effect in 1H20, due to
    1. straightlining effects for rents in Germany and Italy post-rent restructuring (no distribution available from the actual rent received as accounting rent recorded was higher than actual rent received);
    2. absence of capital distributions.
  • As such, CDL Hospitality Trusts's 1H21 DPU fell 19.2% y-o-y to S$0.0122, meeting 23% of ours and the street’s estimates, below expectations.

Sequential improvement in RevPAR for most markets

  • RevPAR improved q-o-q for most markets, with the exception of hotels in New Zealand (block-booked by government but with lower occupancy) and Maldives (weaker seasonal demand and temporarily travel ban for tourists from South Asia which was subsequently lifted on 15 Jul).
  • Occupancy rates for its Singapore and New Zealand hotels remained supported by demand for isolation businesses. For Singapore (excluding W Hotel), RevPAR was up 11% to S$66 (+20% q-o-q) in 2Q21. Including W Hotel, RevPAR would have grown 35.8% y-o-y to S$76 (+13% q-o-q) in 2Q21.
  • Management expects the SHN business to continue into 3Q21 and income to remain supported by master leases in 2H21 for Singapore hotels.
  • For CDL Hospitality Trusts’s overseas hotels, we saw encouraging signs of recovery for UK, Germany and Italy hotels as travel restrictions were lifted in 2Q with strong pent-up leisure demand.

Eyes for acquisition opportunities in developed markets with an expanded mandate

ESG Updates

  • CDL Hospitality Trusts ranks below industry average in terms of governance and social issues. CDL Hospitality Trusts’s board lacks independent director majority, and fully independent audit and pay committees which may hinder its oversight of management and financial reporting practices. Moreover, CDL Hospitality Trusts shows limited evidence of employee development initiatives. However, evidence suggests that CDL Hospitality Trusts continues to promote green investment strategies in managing its property portfolio. Its environment score is on par with industry average.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2021-08-02
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