Broker: Maybank Research Pte Ltd
Date of Report: May 2, 2025

CDL Hospitality Trusts: Navigating Headwinds Amid Global Hospitality Market Volatility

Overview: CDL Hospitality Trusts Faces Challenging 1Q25, Maintains Hold Rating

CDL Hospitality Trusts (CDREIT SP), a leading Singapore-listed REIT with a diversified portfolio of hotel and lodging assets, encountered a challenging first quarter in 2025. Despite persistent macro headwinds, prudent capital management and contributions from recent acquisitions provide some resilience. Maybank Research maintains its HOLD rating, with a target price of SGD 0.75 and a current share price of SGD 0.80, reflecting a cautious but steady outlook.

First Quarter 2025 Performance: Revenue and Income Slide

• Revenue: SGD 63.4 million (-2.8% YoY)
• Net Property Income (NPI): SGD 30.0 million (-14.2% YoY)
• Major Contributors: Singapore, Maldives, and the UK accounted for 83% of NPI
• RevPAR (Revenue Per Available Room): Declined or was flat in most markets except Japan and Germany
• Singapore RevPAR: Fell 15.6% YoY, impacted by lower rates, occupancy, and ongoing renovations at W Singapore
• Gearing Ratio: 41.8%, up from 40.7% in Q4 2024; still within comfortable limits
• Cost of Debt: Decreased to 3.9% from 4.0% in Q4 2024

Key Financial Metrics Table

Market Performance and Portfolio Insights

CDLHT’s portfolio includes 19 properties valued at SGD 2.9 billion with 4,821 rooms and one mall, plus a build-to-rent project in Manchester, UK. The trust’s sponsor, Millennium & Copthorne Hotels, operates over 130 hotels globally. The parent, City Developments Ltd, is Singapore’s second-largest listed developer.

Portfolio Breakdown by Geography (as of latest report):

• Singapore: 65%
• Australia: 3%
• New Zealand: 8%
• Maldives: 5%
• Japan: 3%
• United Kingdom: 8%
• Germany: 6%
• Italy: 2%

RevPAR Trends by Market (1Q25):

• Singapore: SGD 173 (-15.6% YoY)
• New Zealand: 160 NZD (-3.6% YoY)
• Australia: 132 AUD (+1.5% YoY)
• Japan: 11,136 JPY (+11.2% YoY)
• Maldives: USD 464 (-10.3% YoY)
• United Kingdom: GBP 98 (-5.8% YoY)
• Germany: EUR 68 (+4.6% YoY)
• Italy: EUR 111 (-22.9% YoY)

Capital Management and Financial Strength

• Gearing: Rose to 41.8% from 40.7% the previous quarter, yet remains within the REIT’s comfort zone.
• Cost of Debt: Improved to 3.9% (down from 4.0%), with a guided range of 3.5-4% for FY25.
• Interest Cover Ratio: 2.20x for 1Q25, down from 2.30x in 4Q24.
• Debt Headroom: SGD 694 million as of end-Sep 2023, supporting future acquisitions.

Valuation Approach and Outlook

Maybank values CDLHT using a three-stage dividend discount model (CoE: 7.0%). While excluding new acquisitions and developments, NPI is tracking at just 19.6% of the full-year forecast, suggesting downside risk if current trends persist. However, full-year contributions from recent acquisitions (Hotel Indigo Exeter, Benson Yard), stabilization of The Castings (target occupancy: 90%), and lower borrowing costs are expected to support distributions.

Dividend and Profitability Forecasts

• DPU Growth: 0.9% in FY25E, 4.3% in FY26E, 20.1% in FY27E.
• Forecasted DPU Yield: 6.7% for FY25E, rising to 8.5% in FY27E.
• ROAE: Expected to improve from 1.5% (FY25E) to 3.0% (FY27E).
• Net Property Income Margins: Stable at 53-54% over forecast period.

Business Model, ESG, and Governance

• External Management: Managed by City Developments’ subsidiaries; strong pipeline for asset growth.
• Board Independence: 5 of 6 board members are independent; CEO is sole executive/non-independent director.
• ESG Initiatives:
  • All five Singapore hotels are BCA Green Mark Gold certified or above (two at Platinum).
  • Millennium & Copthorne (M&C) hotels target ≥3% annual energy reduction; Pullman under Accor’s Planet 21; Cambridge hotel aims for 52% carbon intensity reduction by 2030.
  • Portfolio-wide goal: 5-7% energy reduction, 2-7% water reduction over five years (from FY19 baseline).
• Social Initiatives:
  • Employee engagement via leadership development and anonymous feedback surveys.
  • LGBTQ+ inclusion recognized at Hilton Cambridge City Centre.
  • Gender diversity in workforce and management tracked; management team 50% female.
• Governance:
  • Revised performance fee structure links more closely to NPI, aligning with peers.
  • Payout ratio for taxable income consistently above 90% threshold for tax transparency.
  • Strong balance sheet: average leverage c.34% (2017-2021).

Risks and Swing Factors

• Potential downside from global trade uncertainty, FX volatility, and macroeconomic headwinds affecting travel demand.
• Delayed interest rate cuts and higher operating costs could pressure margins.
• Upside potential from earlier-than-expected recovery in corporate travel and RevPAR, as well as accretive acquisitions and asset divestments.
• Risk of new hotel supply outpacing demand in key markets.
• Significant FX volatility may impact DPU, despite hedging efforts.

Historical Performance and Shareholder Information

• 2023-2025 Share Price: 52-week high/low at SGD 1.02/0.73; current market cap SGD 989.3 million.
• Major Shareholder: City Developments Ltd holds 33.8%.
• Free Float and Shares: 1,244 million issued shares, free float not specified.
• Relative Performance: Absolute 1-year return -18%, underperforming the Straits Times Index (-30% relative).

Conclusion: Attractive Valuations, But Remain Cautious

CDL Hospitality Trusts offers attractive valuations with a 6.7% yield and trades at just 0.5x FY25E P/B. However, persistent headwinds from soft operating metrics, FX volatility, and macro uncertainty warrant caution. Investors are advised to monitor developments closely as the full-year outlook will become clearer by 1H25.
Maybank Research maintains its HOLD rating, awaiting further clarity on operating and financing trends before reassessing the outlook for CDL Hospitality Trusts.

Contact Information

For more information, reach out to the lead analyst: Krishna Guha krishna.guha@maybank.com (65) 6231 5842

Disclaimer: This article is for informational purposes only and should not be taken as investment advice. Investors should conduct their own research or consult a financial advisor before making investment decisions.