CDL Hospitality Trusts Review @ 26 March 2021

Basic Profile & Key Statistics

CDL Hospitality Trusts (CDLHT) is a stapled group that invests mainly in hospitality properties and currently owns 18 properties across 8 countries.

Performance Review

Gross revenue, NPI, distribution to unitholders and DPU decreased YoY by 36.5%, 46.2%, 28.7% and 29.2% respectively. Distribution to unitholders in 2H is inclusive of part of the proceed from sales of Novotel Singapore Clarke Quay.

REVPAR decreased YoY across all countries with Italy ranks as the worst. New Zealand has the least drop, mainly contributed by Grand Millennium Auckland which is secured with the government’s managed isolation business.

REVPAR has improved for Singapore, New Zealand, Japan and Maldives while REVPAR for UK, Germany and Italy has worsened due to the new lockdown imposed in November 2020. 

Lease Profile

• WALE is long at 5.76 years
• Highest lease expiry within 5 years is slightly low at 26% which falls in 2022.
• Weighted average land lease expiry is long at 80.85 years

Debt Profile

• Gearing ratio is moderate at 37.5%
• Cost of debt is low at 1.9%
• Fixed rate debt % is low at 66%
• Unsecured debt % is high at 89.2%
• WADM is short at 2.4 years 
• Highest debt maturity within 5 years is slightly low at 28.1% which falls in this year
• Interest coverage ratio is low at 2.2 times

Diversification Profile

• Top geographical contribution is slightly low at 50.8%
• Top property contribution is low at 14%
• Top 5 properties contribution is low at 50.6%
• Top tenant contribution is high at 20.7% 
• Top 10 tenants contribution is high at 93.4% 
• Top 3 countries contribution is from Singapore, New Zealand and England which contribute close to 3/4 of GRI. 

Key Financial Metrics

• Property yield is low at 2.5%
• Management fees over distribution is high at 17.7% in which unitholders receive S$ 5.65 for every dollar paid 
• Distribution on capital is low at 2.2%
• Distribution margin is low at 34.4% 
• 33.1% of the past 4 quarters distribution is from partial proceeds of Novotel Singapore Clarke Quay divestment 

Trends

• Slight Downtrend - NAV per Unit
• Downtrend - DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

• Dividend Yield - Past 4 quarters DPU @ 4.95 cents / average yield @ 6.34% = S$ 0.78
• Price/NAV - NAV @ S$ 1.33 x average P/NAV @ 0.96 = S$ 1.28

Author's Opinion

Favorable	Less Favorable
Long WALE	Short WADM
Long Weighted Average Land Lease Expiry	Low Interest Coverage Ratio
Low Cost of Debt	High Top Tenant & Top 10 Tenants Contribution
High Unsecured Debt	Low Property Yield
Low Top Property & Top 5 Properties Contribution	Non Competitive Management Fees
	Low Distribution on Capital
	Low Distribution Margin
	High Distribution from Asset Disposal
	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

To cushion the drop in distributable income, management had top-up the distribution with partial proceeds from divestment, which amount to 33.1% of the past 4 quarters distribution. With the vaccination started in multiple countries, the hospitality sector is expected to recover slowly, albeit it would take time before full travel is resume. From the annual report, as of 28 February 2021, all CDLHT hotels are open except for Hotel Cerretani Firenze ‐ MGallery in Italy.

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.