Maybank Securities’ Chua Su Tye has upgraded his call on CDL Hospitality Trusts from “hold” to “buy” as he sees this stapled REIT as the “best hospitality sector recovery proxy”.
CDLHT on April 29 reported that net property income and revenue for 1QFY2022 ended March was up by 23% and 36% y-o-y respectively.
It attributes the gain to a recovery in revenue per average room night in its properties spread across Singapore, Japan, Germany, Italy, UK and the Maldives, in line with the relaxation of travel in more countries.
“We see long-haul travel recovery determining its earnings trajectory, with risk on the upside, given better-than-expected pricing power, against rising demand,” writes Chua in his May 3 note.
With better visibility on demand leading to better fundamentals in the coming 2HFY2022, Chua has increased his forecast for CDLHT’s distribution per unit by between 5 and 15%, which will translate into a yield of 5.5% for FY2023.
Using a dividend discount model, Chua has revised his target price to $1.45 from $1.20 previously.
See also: Test debug host entity
Down the road, with a debt headroom of $575 million, CDLHT is seen to likely acquire build-to-rent and student accommodation assets to lift its assets under management in markets ranging from Europe, Japan and Australia.
DBS Group Research is similarly cheered by CDLHT's 1QFY2022 operational update, singling out the strong showing recorded by its two Maldives properties: Angsana Velavaru and Raffles Maldives Meradhoo.
During the quarter, RevPar Maldives hit a two-year-high.
See also: Maybank downgrades ComfortDelGro in contrarian call over Addison Lee acquisition worries
"Despite approaching a seasonal low in the coming months, the manager remains optimistic that their hotels will be able to capture the luxury leisure demand from travellers within Asia and from the West," says DBS in its April 29 note, where its "buy" call and $1.40 target price is under review.
CDLHT las traded at $1.34.
