RevPAR growth, rising rates, higher visibility
CDLHT’s 1Q22 revenue/NPI rose c.36% YoY/c.23% YoY, driven by RevPAR
recovery in Singapore, Japan, Germany, Italy, UK, and the Maldives. While
occupancies were softer, ADRs grew with pent-up demand, as travel was
relaxed from Mar 2022. We see long-haul travel recovery determining its
earnings trajectory, with risk on the upside, given better-than-expected
pricing power, against rising demand. Demand visibility in Singapore has
improved, with better fundamentals in 2H22. With stronger RevPAR, we
raised DPUs by 5-15% and our DDM-based TP to SGD1.45 (COE: 5.9%, LTG:
2.0%) from SGD1.20. Risk-reward is favourable in our view, at 5.5% FY23E
DPU yield and 25% 2-year DPU CAGR. Upgrade from HOLD to BUY, and we
rate CDLHT as the best hospitality sector recovery S-REIT proxy.
Singapore recovery set to strengthen
Singapore hotel RevPAR rose c.41% YoY to SGD95 in 1Q22 (vs +20% YoY in
4Q21), with demand recovery backed by staycations and corporate project
groups. Government contracts for two of its six hotels are expected to end
by 3Q22. Management said bookings for the others (excluding W) have
risen 15-20% following Singapore’s relaxation, with higher regional leisure
demand, while forward booking at W is strong with ADR above pre-Covid.
CDLHT sees RevPAR rising to 70-75% of pre-Covid levels in FY22 with the
return of long-haul leisure travel and a stronger 2H event calendar.
Overseas a mixed bag, RevPAR set to improve
Overseas hotels reported better NPIs, driven by the Maldives, UK, Germany
and Italy, with RevPAR weaker in New Zealand (at -6% YoY) and Australia (-
39% YoY) due to lower occupancies. RevPAR jumped c.66% YoY in the
Maldives, but should ease with lower demand from Russia and the Ukraine.
UK’s RevPAR was GBP86 (vs GBP109 in 4Q21 and GBP10 in 1Q21), helped
by pent-up demand, while NPI included contribution from the Hotel
Brooklyn acquisition from 22 Feb. We see further improvement in RevPAR
and better visibility in 2H22.
Sound balance sheet, upside from AUM growth
Gearing was higher at 39.8% (vs 39.1% at end-Dec 2021), with a SGD575m
debt headroom (at 50% limit). Its fixed debt has risen to 63.5% (from 61.3%
in 4Q21) with borrowing cost low at 2.1% but expected to rise. We estimate
a 50bps rise in interest rate could lower DPUs by c.3%. CDLHT continues
to eye growth for its build-to-rent and student accommodation AUM (in
Europe, Japan and Australia), and hotel assets backed by master leases.