FY21A a miss
CDLHT reported 2H21 DPU of SGD3.06cts at -11% YoY, with c.40% from dividend top-ups, and c.SGD30m in divestment gains still to be deployed. FY21 DPU of SGD4.27cts at -14% YoY would have met c.90% of our and street estimates. Rising vaccination rates and gradual border reopening suggest better fundamentals in FY22E, but demand visibility remains low. We fine-tune our estimates, and keep our DDM-based TP (COE: 7.1%, LTG: 2.0%) at SGD1.20. We prefer ART (ART SP, CP SGD1.03 BUY, TP SGD1.30) for its long-stay assets and upside from capital distributions amid slower DPU growth, and FEHT (FEHT SP, CP SGD0.57 BUY, TP SGD0.70), for its Singapore-focused AUM and higher master lease contributions.
Singapore recovery needs firmer footing
Singapore hotel RevPAR increased 20% YoY in 4Q21 to SGD107, underpinned by strong staycation demand and inbound travel from Vaccinated Travel Lanes (VTLs) in late 2021. For FY21, RevPAR was up 1.0% YoY while NPI rose 0.3% YoY due to concentration from government-backed isolation demand
and an absent corporate event calendar. A steady expansion of VTLs bodes well for RevPAR recovery in FY22E, but visibility is still weak. With 4 of 6 hotels no longer on government contracts, CDLHT will eye growth from staycation and long-stay corporate demand. Management guided for softer RevPAR going into 1Q22, from disruption due to the Covid-19 Omicron variant, before potentially recovering in 2Q22.
Overseas RevPARs set to rise
Overseas hotels reported better NPIs in 2H21, except Australia, where demand was constrained by border closures and interstate travel restrictions. NPI rose in aggregate for its properties in Europe, New Zealand, the Maldives and Japan at c.104% YoY and c.54% HoH, largely on pent-up demand as RevPARs for the UK and Maldives jumped YoY at 2.7x and 3.7x, and higher utilisation of its managed isolation hotel in Auckland. We see stronger RevPAR growth in FY22E, as demand recovery gains traction, with easing of borders and return of large scale events.
Sound balance sheet, eyeing AUM growth
Gearing was lower at 39.1% from 40.1% at end-Sep 2021, with an estimated SGD614m in debt headroom (at 50% limit). Its AUM was up c.2% YoY to SGD2.7b, with Singapore hotels (c.65% of AUM) seeing an average cap rate compression of 64bps. With the sector recovery still uneven, we expect management will further diversify away from its traditional lodging AUM, likely through third-party acquisitions.