CDL Hospitality Trusts - A Superb 3Q, Bolstered By Singapore Hotels
- CDL Hospitality Trusts (SGX:J85)'s 3Q22 revenue/NPI grew 46.4%/54.4% y-o-y to S$58.5m/S$31.6m, with Singapore (SG) and Australia the most significant contributors to NPI improvement.
- 3Q22 RevPAR in 5 out of 7 of CDL Hospitality Trusts’s geographies exceeded 3Q19 levels. New Zealand (NZ) and Japan lag the recovery, impeded by slower border re-openings. 3Q22 RevPAR for 12 out of 18 hotels exceeded 3Q19 levels.
- 3Q22 was an exceptionally strong quarter for CDL Hospitality Trusts’s SG portfolio, driven by strong pick-up in MICE, corporate travel (including project groups) and return of Formula One (F1) Grand Prix. 3Q22 RevPAR and NPI for five out of six of its SG hotels were above 3Q19 levels.
- To ride on Singapore’s strengthened reputation as a MICE location, Grand Copthorne Waterfront will undergo an asset enhancement initiative from Oct 22-Aug 23, which involves the phased refurbishment of 529 or 92% of its rooms, and renovation of its meeting facilities to boost the hotel’s prospects as a conference hotel. Australia and Germany also experienced similar corporate and leisure demand, while Italy’s hotel demand was driven by domestic, intra-Europe and US leisure travel.
- CDL Hospitality Trusts’s SG portfolio will see a 140% or ~S$3m increase in FY23’s electricity cost at the NPI level when the new contracts kick in. SG will account for 70% of FY23’s increase in utilities. We understand the productivity gains have resulted in a 10% reduction in payroll costs for its SG hotels.
- Its Maldives hotels are susceptible to volatile oil prices as electricity is produced by diesel generators. The installation of solar panels at both of its Maldives properties is expected to be completed by 2Q23 and is expected to reduce electricity costs by 10%.
- In 4Q22/FY23, 18%/21% of CDL Hospitality Trusts's debt is up for renewal, comprising GSP, S$ and EUR borrowings. Management will attempt to manage the cost of debt by calibrating the interest rate hedge ratio but expects cost of borrowing to increase by ~100bps in FY23 from 2.5% as at Sep 22.
- We keep our FY22-24F DPU estimates for CDL Hospitality Trusts unchanged. We roll forward our estimates to FY25F. DDM-based target price for CDL Hospitality Trusts falls from S$1.38 to S$1.30 as we impute higher risk-free rate, raising our COE from 8.3% to 8.8%. Stay invested to reap more travel recovery & 6.7% FY23F DPU yield.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | https://www.cgs-cimb.com 2022-10-29 2022-10-29
Previous report by CGS-CIMB:
2022-10-07 CDL Hospitality Trusts - Moving Up Singapore Recovery Timeline.