Turnaround for CDL Hospitality Trusts in sight, analysts say

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Analysts were positive on the outlook for CDL Hospitality Trusts, pointing to signs of recovery in the Singapore market.

RHB tipped the trust as its top hospitality pick, saying it expected mid-single-digit growth in revenue per available room (RevPAR) in the Singapore portfolio and pointing to a 5.1 percent on-year increase in Singapore RevPAR for the first 27 days of January.

“Despite 2019 being an odd year (even years typically have more biennial events) management noted that corporate demand (c.55 percent of total) is expected to remain stable with a pick-up seen from sectors such as IT, Pharma and Infrastructure,” RHB said in a note on Wednesday.

“Leisure demand is expected to continue its healthy growth supported by an increase in airline capacity and more attractions,” it said.

RHB also pointed to an improved outlook for the Maldives from the second quarter, with the completion of the renovation of the Dhevanafushi Maldives Luxury Resort, which will be rebranded and opened as Raffles Maldives Meradhoo. It estimated the new resort would garner a 20-30 percent increase in room rates.

The brokerage rated the stock at Buy with a S$1.80 target price.

‘High conviction’

CGS-CIMB also said the CDLHT was a “high conviction” pick, rating the stock at Add and raising its target a tad to S$1.64 from S$1.63.

“CDLHT remains our pick for 2019 due to its recovery story,” CGS-CIMB said.

“We expect its RevPAR in Singapore to see improvements going forward, driven by the lower supply and encouraging tourist arrivals in Singapore,” it added, noting the second half of the year should be stronger as the Orchard Hotel will complete its refurbishment and the Maldives resort will start operating.

Maybank KimEng also tipped the trust as its top sector pick, calling a good proxy to the sector’s recovery. Singapore’s hotel sector has faced a prolonged downturn amid a glut of new rooms, but new supply has tapered off.

It noted it expected further improvement in the Singapore net property income amid stronger demand fundamentals. That included a 6 percent on-year increase in inbound arrivals in Singapore for the first eleven months of 2018. The brokerage forecast RevPAR growth of 5-6 percent over 2019-20 on volume growth and a pick-up in yields.

“We see further traction with its overseas expansion,” Maybank KimEng added.

The brokerage raised its target price on the stock to S$1.80 from S$1.75, keeping a Buy call.

On Tuesday, CDL Hospitality Trusts reported its fourth quarter net property income fell 5.4 percent on-year to S$38.41 million on the divestment of two Australian hotels in January 2018 and the temporary closure in June of the Dhevanafushi Maldives Luxury Resort for renovations.

CDL Hospitality Trusts’ units were up 2.45 percent at S$1.67 at 11:59 A.M. SGT.

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