CDL Hospitality Trust Overview
Date: October 29, 2024
Broker: CGS International
Performance Summary
CDL Hospitality Trust (CDREIT) experienced a decline in its 3Q revenue and net property income (NPI), with a year-over-year decrease of 3.7% and 6.8%, respectively. For the first nine months of FY24 (9M24), revenue and NPI increased by 2.9% and 1.0%, respectively, largely supported by performance in Singapore, Australia, Japan, and Germany. Among the eight geographical markets, seven outperformed 2019 levels in 3Q24, with New Zealand being the only exception.
RevPAR Analysis
In 3Q24, RevPAR performance varied significantly across the portfolio. Australia saw a notable increase of 17.5% YoY, while Germany experienced a 12.4% YoY rise. Japan’s RevPAR grew by 16.5% YoY, and the Maldives reported an increase of 12.3% YoY. Conversely, Singapore faced a 10.3% YoY decline in RevPAR due to lower average daily rates (ADR) and occupancy levels, stemming from a high base in 3Q23. Other regions such as New Zealand and Italy also reported declines of 17.2% and 7.4% YoY, respectively.
Financial Metrics
The cost of debt for CDREIT increased by 20 basis points quarter-over-quarter to 4.4% as of 3Q24, with gearing rising from 37.7% in 2Q to 38.8% in 3Q. Management projects that gearing will reach approximately 39.5% following the acquisition of Hotel Indigo Exeter. The interest coverage ratio (ICR) showed a slight improvement to 2.55x, compared to 2.66x in the first half of FY24.
Recent Acquisition
On October 15, 2024, CDL Hospitality Trust announced the acquisition of Hotel Indigo Exeter along with two retail units for £19.4 million (approximately S$33.2 million), representing about 1.1% of its assets under management (AUM). The upscale lifestyle boutique hotel, which features 104 rooms, reopened in October 2023 after renovation. The management anticipates a stabilised net property income (NPI) yield of around 8%, with stabilization expected in FY26F. This acquisition is viewed as a strategic opportunity to enhance operational performance.
Market Outlook
For FY24, CDREIT expects the cost of debt to remain stable in the low-4% range. Management is confident that the company is not constrained by its gearing levels and will continue to pursue acquisition opportunities. The outlook remains optimistic despite mixed performance across various markets, primarily due to ongoing asset enhancement initiatives and positive trends in key regions.
Investment Recommendation
CGS International maintains an “Add” recommendation for CDL Hospitality Trust, with a DDM-based target price of S$1.16. This reflects a potential upside of 25.4% from the current price of S$0.925. Key risks identified include lower-than-expected leisure and corporate travel demand, which could impact occupancy rates and room pricing.
