1H22 results: DPU jumps 67% y-o-y as recovery takes hold
- Strong 67% rebound in DPU as operational metrics improved due to pent-up travel demand.
- Key positive (I) Singapore and Maldives delivered as promised as border re-openings to boost visitations, (ii) utility contracts are generally locked in till end 2022, (iii) Optimistic of an even stronger 2H22.
- Datapoints that we are watching (i) subsequent recovery in RevPAR as we approach high-season for selected markets, especially Singapore, (ii) margins given the higher labour costs & utilities
- BUY call maintained, TP S$1.55
What has happened.
Shooting for the stars; DPU rose by 67% on low base effect.
CDL Hospitality Trusts (CDLHT) reported a 67% y-o-y rise in DPU to 2.04 scts ( vs 1.22 scts in 1H21) anchored by a firm recovery across its key markets, driven mainly from strong leisure demand. Revenues and net property income (“NPI”) rose by 49% and 38%y-o-y to S$98.6m and S$50.9m respectively. NPI driven mainly from their Singapore hotels, UK hotels and Maldives resorts which offset the decline seen in Australia and New Zealand. Interest costs rose by 21% mainly due to additional debt taken for the acquisition of Hotel Brooklyn and UK BTR project. The stronger growth in cashflows drove a c.69% rise in distributions and DPU to 2.04scts. This translates to about c.40% of our full year forecasts.
Financial metrics held steady
Overall gearing stayed stable 39.5% with overall cost of debt inching higher to 2.3% (which was a 20 basis points higher q-o-q). Interest coverage ratio comfortable at 3.5x.
- Portfolio wide recovery accelerated in 1H22. Recovery observed across key markets with net property income (“NPI”) up c.10% q-o-q, driven by higher contributions from Maldives, UK, Singapore and Germany properties. This offsets the drop in net property income from Australia (due to divestment) and New Zealand Hotel.
- The manager sees strong demand recovery in 2Q22, building on the strong momentum seen in 1Q22, boosted by the leisure market and expects corporate demand to follow suit come 2H22. Overall, the manager remains positive that the hospitality sector remains at an inflection point with a stronger 2H22 anticipated on the back of returning corporate travel, MICE meetings.
- Singapore hotels hit variable rent levels. Singapore hotels continue to lead the charge and have risen above its minimum rent for the 5 city-hotels while the W Hotel remains one of Singapore favourite holiday destination for staycation and leisure guests. Utility contracts are locked in until end of 2022 and any increases will be felt later.
- Maldives hit new highs on the back of strong leisure demand. Maldives have powered ahead with 1H RevPAR rising by close to 65% y-o-y. The dip in 2Q22 was due to the usual seasonal low period but 2Q22 revPAR remained 63% higher compared to a year ago.
A summary of performance of the REITs various markets.
|Country||2Q22||2Q21||y-o-y||1H22||1H21||% Chg||Key observations||Outlook|
|Singapore||151||76||+100%||123||72||+72%||Driven by rate growth supported by return of leisure trave and project groups.3 out of 6 hotels exceed 2Q19 RevPAR with a stellar performance seen in Jun’22. 5 city hotels trading above the minimum rent levels with W hotel seeing robust demand.||Positive outlook with return of corporate demandReturn of wedding and MICE events, benefit from robust event line up.Expect RevPAR to hit 70%-75 %of pre-COVID levels in 2022.|
|New Zealand||141||143||-1%||158||164||-4.0%||Dropped because of lower room utilisation and shortening of isolaton period. End of quarantine business.||All visa categories to re-open for visitors from 21st Ju’22 with major events happening in 4Q22, 2023.|
|Australia||86||69||25%||59||61||-3.0%||Restrictions in travel has resulted in soft occupancies with sluggish recovery||Return of events in 2H22 should encourage travel to perth.|
|Japan||3,742||2,679||40%||3,415||2,546||+34%||Higher RevPAR due to state of emergency in 1H21 with minimum travel. RevPAR growth was occupancy driven.||Expected to be flattish from current levels as we await a re-opening of borders for tourists.|
|Maldives||246||151||+63%||381||231||+65%||Robust rebound on the back of tourism recovery as Western Europe borders re-open.||Low exposure to Ukraine travellers. Expect higher RevPAR in 2H22 as leisure travel demand returns.|
|UK||128||51||n.m||107||30||n.m||Recovery in 2Q22 after omicron wave in 1Q22, RevPAR in 2Q22 is 6% lower than 2Q19.||Lifting of border restrictions and return of MICE to translate to a stronger recovery in 2022.|
|Germany||80||19||n.m||52||14||n.m||A gradual recovery on the back of leisure demand.||International borders fully open to all travellers.|
|Italy||195||10||n.m||126||5||n.m||Italy hotel was closed in 1H21 and saw strong recovery on the back of leisure demand.||International borders fully open to all travellers.|