CDL Hospitality Trusts (CDLHT) FY2025 Financial Analysis: Navigating Challenges and Opportunities

CDL Hospitality Trusts (CDLHT), comprising CDL Hospitality Real Estate Investment Trust (H-REIT) and CDL Hospitality Business Trust (HBT), has released its condensed interim financial statements for the six months and full year ended 31 December 2025. This analysis summarizes the key financial metrics, compares performance against previous periods, reviews notable corporate actions, and discusses the outlook for investors.

Key Financial Metrics and Performance Review

Historical Performance Trends

The Stapled Group’s revenue rose both quarter-on-quarter and year-on-year, reflecting resilience in hotel operations and steady rental income. However, net property income grew at a slower pace, and total return swung sharply negative in the second half of 2025, impacted by substantial fair value losses on investment properties and higher operating costs. EPS also turned negative, highlighting significant profitability challenges for the period.

Distribution per Stapled Security remained stable for the half-year (2.82¢ vs 2.81¢) but fell on a full-year basis (4.80¢ vs 5.32¢) as a result of lower distributable income and retention for working capital.

Exceptional Items and Asset Revaluation

• Fair Value Losses: The Group recorded net fair value losses on investment properties of \$28.5m for 2H 2025, compared to a gain of \$5.8m in 2H 2024, reflecting challenging market conditions and asset revaluations.
• Impairment Losses: Impairment losses on trade and other receivables continued to be recognized, impacting overall profitability.
• Asset Revaluation: The Group undertook independent valuations across its portfolio, with fair value measured as Level 3 (unobservable inputs), reflecting market uncertainties and property-specific risks. Discount rates and terminal yields were generally higher compared to prior periods, contributing to lower valuations.

Corporate Actions and Fund Flows

• Perpetual Securities Issued: \$150m in perpetual securities were issued in 2025, improving liquidity and capital structure.
• Stapled Securities Issuance: Management fees continue to be partially paid in Stapled Securities, causing slight dilution (12.5m issued in 2025 vs 10m in 2024).
• Distributions: Aggregate distributions for FY2025 were \$60.5m, down from \$71.3m in FY2024, in line with reduced distributable income.
• Asset Acquisition: The Group completed a hotel acquisition in the UK, recognized as a business combination. Acquisition-related costs of \$2.4m were expensed. No divestments or IPOs were recorded in the period.

Related-Party Transactions and Unusual Flows

Rental income from related corporations remained significant (over \$75m), and shared service/management/advisory fees were paid, indicating ongoing transactions with affiliated entities.

Significant Events Impacting Performance

• No major natural disasters, legal disputes, or macroeconomic policy shifts were disclosed as directly impacting the 2025 results.
• Variable lease payments for assets in the Maldives continued to be recognized, and a multi-year seaplane charter agreement was noted (annual charge ~\$1.7m), affecting cost structure.
• No share buybacks, placements, or new mandates were announced for 2025.

Chairman’s Statement: Tone and Outlook

“We, on behalf of the directors of M&C REIT Management Limited (as Manager of CDL Hospitality Real Estate Investment Trust) and M&C Business Trust Management Limited (as Trustee-Manager of CDL Hospitality Business Trust), hereby confirm that, to the best of our knowledge, nothing has come to the attention of the board of directors of H-REIT Manager and HBT Trustee-Manager which may render the unaudited financial results of CDL Hospitality Trusts for the six months and year ended 31 December 2025 to be false or misleading in any material respect.”

The statement is factual and neutral, with no explicit positive or negative tone. No forward-looking commentary or strategic outlook is provided in the statement itself.

Dividend Declaration and Tax Information

For the second half of 2025, a distribution of 2.82¢ per Stapled Security (2.50¢ taxable income + 0.32¢ capital) was declared, payable on 27 February 2026. The book closure date is 9 February 2026. Taxable income distributions are generally tax-exempt for individuals, while foreign non-individuals are subject to 10% withholding tax and other investors to 17%.

Conclusion and Investment Recommendations

The overall financial performance for FY2025 is weak compared to the prior year. Despite revenue growth, net property income rose modestly and total return turned sharply negative due to asset revaluation losses and rising operating costs. Distributable income and DPS declined, reflecting tighter profitability and higher capital retention needs.

• If you currently hold CDLHT stock: Consider maintaining a cautious stance. The stable distribution and strong asset base provide some downside protection, but persistent profit pressure and asset value declines warrant monitoring. Review your position if you need income stability and can tolerate short-term capital volatility. Watch for improvements in asset valuations, operational efficiency, and cost control in upcoming quarters.
• If you do not currently hold CDLHT stock: Exercise caution before initiating a position. Wait for signs of sustainable profit recovery, stabilization of asset valuations, and an upturn in distributable income. Current market conditions present elevated risks, and there may be better entry points as the hospitality sector navigates ongoing headwinds.

Disclaimer: This analysis is based strictly on the contents of CDLHT’s FY2025 financial report and does not constitute investment advice. Investors should consider their own risk profiles and consult with a professional advisor before making any decisions. Past performance is not indicative of future results.

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