CDL Hospitality Trusts (CDLHT) recently announced its 1HFY2022 ended June results and analysts have mixed sentiments on the trust.
To recap, the trust’s manager, on July 29, announced a distribution per stapled security (DPS) of 2.04 cents for 1HFY2022, up 67.2% y-o-y, as travel demand resumes. Net property income (NPI) improved by 37.8% y-o-y to $51 million; revenue was up 49% over the same period to $98.6 million.
Citi Research remains the most bearish as it keeps a “sell” call on CDLHT with a target price of $1.15, as analyst Brandon Lee attributes his recommendation to 2QFY2022 results missing his forecast, which could result in negative share price impact.
While Lee notes that the trust has posted improvement in its latest results thanks to operational recovery across its core markets of Singapore, UK and Maldives – representing about 80% of NPI – as leisure travel continued to bounce with easing restrictions.
However, in view of weak share price performance, valuations in-line with mean, earnings disappointment and the trust’s sponsor City Developments likely to become more proactive with asset injections post consolidation, Lee is keeping is bearish view and reiterating his “sell” call.
RHB Group Research on the other hand continues to have a “neutral” stance on CDLHT with a target price of $1.30, as analyst Vijay Natarajan has a positive outlook on the trust, but is concerned about risks emerging.
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“1HFY2022 operational numbers were broadly in line. While CDLHT’s key markets are staging a strong recovery on the back of pent-up demand, we see risks to travel recovery in 2023 from the worsening macroeconomic outlook, inflationary pressures and a drop in pent-up demand,” says Nararajan.
“We see limited accretive acquisition opportunities, with gearing at 40% limiting debt headroom. Valuation has priced in the ongoing recovery, in our view, with the stock trading at 1x P/B,” he adds.
As CDLHT recorded improvement across most of its markets, except New Zealand, management is expecting the growth to continue in the near term as it guided for a positive 3Q/2HFY2022 outlook based on healthy forward bookings across its key markets – Singapore, Maldives and the UK. It expects asset values to remain largely firm despite rate hikes on the back of healthy demand for hospitality assets post Covid-19.
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On the other hand, Maybank Securities is bullish on the counter as it keeps its “buy” call on CDLHT with a target price of $1.40, as revenue per average room (RevPAR) strengthened in 1HFY2022.
Analyst Chua Su Tye says, “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 is improving, with better fundamentals in 2HFY2022.”
Chua is upbeat on the trust’s recovery in the Singapore market, as three of its six hotels exceeding 2QFY2019 RevPAR, underpinned by strong demand from leisure and project groups.
“A rebound in tourist arrivals and longer average stays, coupled with a stronger event calendar and improving MICE activity, should support further RevPAR recovery in 2HFY2022. We see better visibility in the coming quarters, and also upside to forecasts,” adds Chua.
For the trust’s overseas portfolio, Chua too expects NPI to improve further. While the trust’s management sees healthy forward bookings from pent-up leisure demand, with RevPAR expected to track pre-pandemic levels in 2HFY2022, the analyst also expects recovery to gain traction, with a pick-up in corporate demand, Japan’s border opening and contribution from Chinese travellers.
Sharing similar sentiments, DBS Group Research continues to rate CDLHT "buy" with a target price of $1.55.
Analysts Geraldine Wong and Derek Tan like the counter as they see positives from a multi-year acceleration in RevPAR, driving P/NAV multiples higher, and a 25% CAGR in FY2022-FY2024 DPU.
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"CDLHT continues to be one of the top beneficiaries of a rebound in tourism demand as Singapore re-opens its borders and countries in the region ease Covid-19 test requirements," says the analysts, who also expect staycation demand to remain strong and stronger demand from the return of corporate travellers, allowing the REIT to raise room rates come 2HFY2022.
Its overseas hotels are also expected to benefit from resilient, domestic-driven businesses coupled with an expected boost in international leisure travel demand.
Meanwhile, the analysts are upbeat on CDLHT's venture into lodging asset classes.
"The pivot towards the built-to-rent (BTR) sector amongst other possible future lodging asset classes highlights the management’s strategic intent to build resilience through diversity and earnings stability post pandemic," says Wong and Tan.
"With varied demand drivers, compared to hospitality assets, we believe the BTR investments will be value accretive and complement the company’s portfolio," they add.
As at 11.40am, units in CDLHT are trading at $1.31.
