SINGAPORE (July 31): CDL Hospitality Trusts (CDLHT) is RHB’s preferred hospitality REIT pick given that it remains one of the best proxies to ride the expected rebound in Singapore hotel RevPARs.
In a Monday report, analyst Vijay Natarajan says CDLHT’s 2Q17 results were in line as it reported a 2.7ppt rise y-o-y in hotel occupancy rates while room rates dipped 4.7%. This led RevPAR to decline by 1.4%.
“In July 1-24, its Singapore hotels’ RevPAR rose 0.9% y-o-y. Meanwhile, based on latest data from the Singapore Tourism Board (STB), Horwath HTL and CDLHT, we note that some of 2017’s new room supply has been pushed to 2018, which is a positive,” says Natarajan.
The analyst expects the hotel rooms demand to far outstrip the supple CAGR of 2.5% in 2016-2019 and RevPAR to grow 3-5% in 2018-2019 respectively after the group reported a 2% dip this year.
Looking ahead, CDLHT’s management expects occupancy rates to stabilise and is looking to gradually increase room rates.
CDLHT’s New Zealand hotel – Grand Millennium Auckland – spotted “impressive” performance in 2Q17, with its net property income (NPI) increasing by 94% y-o-y.
This was attributed to a visitor surge, new master lease structure that captures upside and strong brand presence of a new hotel operator in the local market.
“With future supply remaining limited in Auckland and visitor arrivals expected to grow, CDLHT’s New Zealand hotel should continue its strong outperformance,” says Natarajan.
However, the group’s RevPAR in Maldives and Japan are likely to remain subdued in the near term, as it declined 16.3% and 4.2% y-o-y respectively on the back of new hotel room supply.
CDLHT is also expanding its presence in Europe as it acquired The Lowry Hotel in Manchester, UK and Pullman Hotel in Munich, Germany.
These yield-accretive acquisitions would only start kicking in from 3Q17.
CDLHT also announced a 1:5 fully-underwritten rights issue at $1.28/unit, raising gross proceeds of $255.4 million. The rights shares were 2.2 times subscribed, with new shares to begin being traded on Aug 2.
Units in CDLHT are trading at $1.58 as of 10.41am.
