Recovery momentum from hotel segment
? Hotels performed best in 1Q, residential to benefit from new launches in 2Q.
? CIT is unlocking the value of its stake in Golden Mile via a S$700m collective
sale.
? We reiterate our Add rating with a TP of S$8.97.
1Q22 business update
In its 1Q22 business update, CIT indicated that its business segments continued to
display good momentum, as pandemic restrictions ease and borders reopen. The group
continued to unlock value from its portfolio; in addition to Millennium Hilton Seoul and
Tanglin Shopping Centre, the group is unlocking value from the collective sale of Golden
Mile Complex for a total of S$700m in May 2022, w here it has a 6.3% share of total
Share Value and 34.8% stake of Strata Area of the property. CIT’s net gearing ratio (after
fair value adjustment) w as 53% at end-1Q22 w ith strong cash reserves of S$3.1bn.
Management remains upbeat on outlook for its core segments for the rest of 2022F.
Residential likely to improve in 2Q22F on the back of new launches
Not surprisingly, Singapore residential sales w ere impacted by the Dec 2021 property
cooling measures, w ith CIT selling 188 units valued at S$477.9m in 1Q22, -41% yoy.
Construction activities in Singapore are accelerating as the labour crunch eases. The
group recently launched the 407-unit Picadilly Grand to a 77% sell-through rate on the
first weekend of launch. In terms of landbanking, it acquired two residential sites in 1Q22,
with a potential to build 1,040 units and completed the purchase of Central Square, to be
redeveloped into a mixed-use development. Meanwhile, sales at its Melbourne, Brisbane
and New South Wales continued to see a healthy take-up rate. To grow its pipeline, CIT
had also entered into a new JV with New Urban Villages to acquire a mixed-use
development site in Brisbane.
Singapore saw positive reversions, China impacted by lockdown
Meanw hile, investment properties in Singapore continued to enjoy healthy occupancy
rates of 93-95% and registered positive rental reversion in 1Q22. Management guided
that due to the Covid lockdow n in Shanghai, it may need to provide some tenant support,
particularly for its property in Suzhou. Management said that retail w as severely impacted
as only essential services and takeaw ays w ere allow ed.
Hotel segment benefitted from increased global travel
Hotel operations posted a strong quarter, with portfolio RevPAR more than doubling yoy
to S$89.6/room night in 1Q22. Accordingly, GOP margin increased to 14.6% in 1Q22 vs.
6.1% in 1Q21. London and New York posted the strongest RevPAR improvements of
1,091% and 126.8% yoy respectively. Plans are underway to rebrand the Millennium
Downtown New York into an M Social in 2023F. We believe that the hospitality segment
should continue to trade w ell for the rest of 2022F with the rebound in global travel.
Reiterate Add with a TP of S$8.97
We leave our FY22-24F estimates unchanged. Our TP of S$8.97 is based on a 45%
discount to RNAV of S$16.30. Our current projections have not included divestment
gains from Tanglin Shopping Centre and Golden Mile Complex. CIT is still trading at an
attractive 50% discount to RNAV. A potential re-rating catalyst is a faster-than-expected
recovery in the global hospitality sector. Downside risk: drag from slow macro outlook.