CDL Hospitality Trusts Review @ 15 August 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 Highlight

Gross revenue and NPI increased YoY but distribution and DPS decreased YoY. CDLHT explained the decrease in distribution is due to:

i) NPI increase of S$5.4 million for the UK Hotels and Raffles Maldives Meradhoo was largely due to the low base effect attributed to losses in NPI recorded in 1H 2020 (S$3.6 million impairment recognized in relation to rental receivables), coupled with expenses such as interest costs, administration expenses and taxes.

ii) The accounting rents recorded for the Germany and Italy Hotels (due to the straight-lining effect per SFRS(I) 16/FRS116) was higher than the actual rents received

iii) Absence of one-off contribution from the dissolution of the MCST relating to the divestment of NCQ in 1H 2020.

Compare 2Q 2021 vs 2Q 2020, REVPAR improved YoY across the board.

Overall, REVPAR is stabilized, besides a sharp drop in Maldives due to the suspension of South

Asian tourists in 2Q 2021 but has re-opened on 15 Jul 2021.

AEI for The Lowry Hotel in U.K. is expected to be completed in August 2021.

CDLHT has revised its strategy to include assets used for or other accommodation and/or lodging purposes like rental housing, co-living, student accommodation, and senior housing. This is positive news as CDLHT has larger poor of opportunities and could enhance income stability through diversification.

Related Parties Shareholding

• REIT sponsor's shareholding is high at 38.29%
• REIT manager's shareholding is high at 7.96%
• Directors of REIT manager's shareholding is low at 0.01%

Lease Profile

• WALE is long at 5.76 years
• Highest lease expiry within 5 years is moderate at 26% which falls in 2022
• Weighted average land lease expiry is long at 80.35 years

Debt Profile

• Gearing ratio is slightly high at 39.1%
• Cost of debt is low at 1.9%
• Fixed rate debt % is low at 63.3%
• Unsecured debt % is high at 90% 
• WADM is short at 1.8 years
• Highest debt maturity within 5 years is low at 28.2% which falls in 2022
• Interest coverage ratio is low at 2.8 times

Diversification Profile

• Top geographical contribution is low at 49.8% 
• 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 Maldive which contribute more than 75% of GRI

Key Financial Metrics

• Property yield is low at 2.8% 
• Management fees over distribution is high at 16.7% in which unitholders receive S$ 5.99 for every dollar paid 
• Distribution on capital is low at 2.1%
• Distribution margin is low at 28.1%
• 35.1% of latest 4 quarters DPU is from distribution from asset disposal

Trends

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

Relative Valuation

• P/NAV - Average for 1y, 3y and 5y
• Dividend Yield - Average for 1y; Below -1SD for 3y and 5y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	Low Fixed Rate Debt %
High REIT Manager's Shareholding	Short WADM
Long WALE	Low Interest Coverage Ratio
Long Weighted Average Land Lease Expiry	High Top Tenant & Top 10 Tenants Contributions
Low Cost of Debt	Low Property Yield
High Unsecured Debt %	Non-Competitive Management Fees
Well Spread Debt Maturity	Low Distribution on Capital
Low Top Geographical Contribution	Low Distribution Margin
Low Top Property & Top 5 Properties Contributions	High Distribution from Asset Disposal
	DPU Downtrend
	NAV per Unit Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

The 1H DPU of 1.22 cents is the lowest semi-annual distribution since 2020 despite performance improvement and there is no distribution top-up in this 1H. As more and more countries are easing the travel restriction, CDLHT performance is expected to start recovering and improving. Below is the snapshot from the latest presentation:

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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 and 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.