CDL Hospitality Trusts - Maybank Research 2022-05-03: Proxy To Recovery; Upgrade To BUY

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CDL HOSPITALITY TRUSTS (SGX:J85)

CDL Hospitality Trusts - Proxy To Recovery; Upgrade To BUY

RevPAR growth, rising rates, higher visibility

• CDL Hospitality Trusts (SGX:J85)’s 1Q22 revenue/NPI rose ~36% y-o-y/c.23% y-o-y, driven by RevPAR recovery in Singapore, Japan, Germany, Italy, UK, and the Maldives. While occupancies were softer, ADRs grew with pent-up demand, as travel was relaxed from Mar 2022.
• We see long-haul travel recovery determining its earnings trajectory, with risk on the upside, given better-than-expected pricing power, against rising demand. Demand visibility in Singapore has improved, with better fundamentals in 2H22.

Singapore recovery set to strengthen

• Singapore hotel RevPAR rose ~41% y-o-y to S$95 in 1Q22 (vs +20% y-o-y in 4Q21), with demand recovery backed by staycations and corporate project groups. Government contracts for two of its six hotels are expected to end by 3Q22.
• CDL Hospitality Trusts's management said bookings for the others (excluding W Singapore) have risen 15-20% following Singapore’s relaxation, with higher regional leisure demand, while forward booking at W Singapore is strong with ADR above pre-COVID.
• CDL Hospitality Trusts sees RevPAR rising to 70-75% of pre-COVID levels in FY22 with the return of long-haul leisure travel and a stronger 2H event calendar.

Overseas a mixed bag, RevPAR set to improve

• Overseas hotels reported better NPIs, driven by the Maldives, UK, Germany and Italy, with RevPAR weaker in New Zealand (at -6% y-o-y) and Australia (- 39% y-o-y) due to lower occupancies.
• RevPAR jumped ~66% y-o-y in the Maldives, but should ease with lower demand from Russia and the Ukraine.
• UK’s RevPAR was GBP86 (vs GBP109 in 4Q21 and GBP10 in 1Q21), helped by pent-up demand, while NPI included contribution from the Hotel Brooklyn acquisition from 22 Feb.
• We see further improvement in RevPAR and better visibility in 2H22.

Sound balance sheet, upside from AUM growth

• CDL Hospitality Trusts's gearing was higher yield and 25% 2-year DPU CAGR. Upgrade CDL Hospitality Trusts from HOLD to BUY, and we rate CDL Hospitality Trusts as the best hospitality sector recovery S-REIT proxy.
• CDL Hospitality Trusts continues to eye growth for its build-to-rent and student accommodation AUM (in Europe, Japan and Australia), and hotel assets backed by master leases.
• 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.

Chua Su Tye Maybank Research | https://www.maybank-ke.com.sg/ 2022-05-03

SGX Stock Analyst Report BUY UPGRADE HOLD 1.45 UP 1.200