On 29 October 2024, CDL Hospitality Trusts (“CDLHT”) announced their third quarter business update for FY2024. This is a small business update, with no updates on any DPS. It can be seen that management is actively managing their debts, as the debt profile remains relatively short. With 59.5% of their borrowings on floating rates, it can be inferred that management is anticipating and betting on further interest rate reductions by major banks, which may allow CDLHT to benefit when they occur. Investors will need to monitor for any changes in interest rate policies given their high-interest rate sensitivity.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | No Update | No Change |
| Rating | Neutral | Neutral |
Based on the announcement on 29 October 2024, DPU was not included in the business update for the third quarter of FY2024.
The metric was Neutral in the previous quarter as DPU for the first half of FY2024 remained unchanged at SGD0.0251 per share.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | No Info | No Info |
| Rating | N/A | N/A |
Based on the announcement on 29 October 2024, occupancy rate was not included in the announcement.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 38.8% | 37.7% |
| Rating | Neutral | Favorable |
Gearing ratio increased to 38.8% as of 30 September 2024. Noted the increase was due to additional drawdowns this quarter. The metric shifted towards Neutral.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 2.6x | 2.7x |
| Rating | Neutral | Neutral |
The interest coverage for the trailing 12 months decreased to 2.6 times as of 30 September 2024. The overall metric remains Neutral as the interest coverage remains lower than my preference of 3.0 times.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 2.0 years | 1.8 years |
| Rating | Neutral | Neutral |
Weighted average term to maturity of their debt extended to 2.0 years as of 30 September 2024. This metric remains Neutral as it returned to the 2.0-year mark. Management disclosed that re-financing for the remaining maturing loans in 4Q 2024 is underway and is expected to be completed before end of the year. Approximately 43.7% of their debts are due for re-financing by the end of FY2025.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.59 | 0.64 |
| Rating | Favorable | Favorable |
Based on the announcement on 29 October 2024, Net Asset Value (“NAV”) was not included in the business update for the third quarter of FY2024.
The Price to Book (“P/B”) ratio currently stands at 0.59. This is computed using the closing share price of SGD0.875 on 6 December 2024 and the net asset value per share of SGD1.48 as of 30 June 2024. The P/B ratio is Favorable.
As of 6 December 2024, the Market Capitalization is approximately SGD1,097 million.
Website: Yahoo Finance: CDL Hospitality Trusts (J85.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 6.51% | SGD 0.057 |
| 2023 | 6.97% | SGD 0.061 |
| 2022 | 5.83% | SGD 0.051 |
| 2021 | 5.33% | SGD 0.047 |
| 2020 | 7.28% | SGD 0.064 |
The total dividend payout for the calendar year 2024 amounted to SGD0.057 per share. With a closing share price of SGD0.875 as of 6 December 2024, this translates to a dividend yield of 6.51%. For my benchmark, a reasonable yield would be around 5.00%. CDLHT is above the range and the dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q4 – 5.00%
Interest Rate Sensitivity
The Federal Reserve on 7 November 2024 have further slashed interest rate by a quarter point to a range of 4.50% to 4.75%. This is in line with earlier expectations for future rate cuts, which will benefit REITs in general.
Website: Federal Reserve cuts interest rates by a quarter point
The Federal Reserve has subsequently announced on 15 November 2024 that they will cut their key interest rate slowly and deliberately in the coming months, in part because inflation has shown signs of persistence, and the officials want to see where it heads next.
Website: Powell says Fed will likely cut rates cautiously given persistent inflation pressures
CDLHT have provided the interest rate sensitivity analysis as below. Should the interest rate change by another 1.0%, using FY2023 DPS of 5.70 cents as a base, DPS is expected to change by 17.2%.
| Change in Interest Rates | Change in DPS (cents) | Change as % of FY2023 DPS |
|---|---|---|
| 50 bps | 0.49 | 8.6% |
| 100 bps | 0.98 | 17.2% |
| 150 bps | 1.47 | 25.8% |
| 200 bps | 1.96 | 34.4% |
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | No Update | Neutral |
| Occupancy | No Update | N/A |
| Gearing Ratio | 38.8% | Neutral |
| Interest Coverage | 2.6x | Neutral |
| Debt Maturity Profile | 2.0 years | Neutral |
| Price to Book Ratio | 0.59 | Favorable |
| Overall | Neutral |
Overall, the metrics indicate that it remains Neutral to invest in CDLHT. The metrics are relatively unchanged this quarter, and management can be seen to be actively managing their debts. This is something that investors should take note of given the relatively short debt maturity profile.
Background
CDLHT is one of Asia’s leading hospitality trusts. It comprises CDL Hospitality Real Estate Investment Trust (“H-REIT”), a real estate investment trust, and CDL Hospitality Business Trust (“HBT”), a business trust. CDLHT was listed on the Mainboard of the Singapore Exchange Securities Trading Limited on 19 July 2006, with H-REIT being the first hotel real estate investment trust in Asia (ex-Japan).
H-REIT’s principal investment strategy is to invest in a diversified portfolio of income-producing real estate, which is primarily used for hospitality, hospitality-related and other accommodation and/or lodging purposes (including, without limitation, hotels, serviced apartments, resorts, motels, other lodging facilities and properties used for rental housing, co-living, student accommodation and senior housing) globally.
HBT’s principal investment strategy is to invest in a diversified portfolio of real estate or development projects, which is or will be primarily used for hospitality, hospitality-related and other accommodation and/or lodging purposes (including, without limitation, hotels, serviced apartments, resorts, motels, other lodging facilities and properties used for rental housing, co-living, student accommodation and senior housing) globally and may also include the operation and management of the real estate assets held by H-REIT and HBT.
CDLHT is managed by M&C REIT Management Limited and M&C Business Trust Management Limited, subsidiaries of Millennium & Copthorne Hotels Limited, an internationally recognised hospitality group, which owns and operates hotels globally.
Previous Post
Website: CDL Hospitality Trust (SGX: J85): 2024 Half Year Result
