CDL Hospitality Trusts FY 2024 – Net Property Income Declines by 2.2%

Business Description

CDL Hospitality Trusts (CDLHT) is one of Asia’s leading hospitality trusts with assets under management of approximately S\$3.5 billion as of 31 December 2024. CDLHT comprises CDL Hospitality Real Estate Investment Trust (H-REIT) and CDL Hospitality Business Trust (HBT). The company primarily invests in real estate properties used for hospitality and accommodation purposes globally, with a diversified portfolio of 22 properties across 11 cities in 8 countries, including Singapore, New Zealand, Australia, Japan, Maldives, the United Kingdom, Germany, and Italy.

The portfolio includes 4,924 hotel rooms, 756 Build-to-Rent (BTR) units, 404 Purpose-Built Student Accommodation (PBSA) beds, and a retail mall. Key properties include the W Singapore – Sentosa Cove, Grand Copthorne Waterfront Hotel, and Pullman Hotel Munich. CDLHT is listed on the Singapore Exchange.

Industry Position and Competitive Advantage

CDLHT operates in the global hospitality investment sector. It holds a strong position due to its diversified assets across prime locations. The company competes with other hospitality-focused REITs and business trusts. Its competitive advantages include its scale, geographic diversification, and investments in high-quality and strategically located hospitality assets. CDLHT also benefits from partnerships with well-known hotel operators like Marriott and Hilton.

Revenue Streams

CDLHT generates revenue primarily from rental income, which includes fixed and variable components linked to the performance of its hospitality assets. Additional revenue streams include income from retail tenants in its Singapore portfolio and long-term rental income from its PBSA and BTR properties.

Key Financial Highlights

Summary of FY 2024 Financial Performance

The report covers the financial year ending 31 December 2024. Key highlights include:

• Net Property Income (NPI): Declined by 2.2% YoY to S\$135.2 million, reflecting the normalization of demand post-pandemic.
• Total Distribution: Decreased by 5.8% YoY to S\$66.85 million.
• Total Distribution Per Stapled Security (DPS): Declined by 6.7% YoY to 5.32 Singapore cents.
• Portfolio Valuation: Increased by 4.5% YoY to S\$3.2 billion.

Dividend Details

For the period 1 July 2024 to 31 December 2024, a distribution of 2.81 Singapore cents per stapled security was announced, comprising 2.43 cents of taxable income and 0.38 cents of capital distribution. The distribution will be paid on 28 February 2025.

Special Activities and Growth Initiatives

• Acquisitions: Acquired Hotel Indigo Exeter and Benson Yard PBSA in the UK in 4Q 2024 to diversify income streams and enhance portfolio stability.
• Asset Enhancements: Renovations underway at Ibis Perth, Grand Millennium Auckland, and W Singapore – Sentosa Cove to improve competitiveness in their respective markets.
• Sustainability Initiatives: Installed solar panels at Maldives resorts and expanded sustainability-linked financing to S\$666.0 million.

Strengths and Risks

Strengths

• Diversified portfolio spanning key gateway cities globally.
• Ongoing investments in asset enhancements and sustainability initiatives.
• Strong financial position with S\$526 million in cash and available credit facilities.

Risks

• Decline in Net Property Income and DPS could indicate challenges in maintaining profitability amidst rising competition and normalizing demand.
• Exposure to interest rate fluctuations, with 67.9% of borrowings at floating rates.
• Potential headwinds in markets like Maldives due to increasing luxury supply.

Recommendations

If Currently Holding the Stock

Hold: Existing investors should hold their positions. While there is a decline in NPI and DPS, the acquisitions of new assets and ongoing asset enhancements provide a positive outlook for earnings growth in 2025. Additionally, the diversified portfolio and strong cash position mitigate downside risks.

If Not Currently Holding the Stock

Buy: CDLHT presents a compelling investment opportunity for new investors due to its diversified portfolio, attractive valuations, and efforts to enhance long-term income resilience through acquisitions and asset optimization. However, investors should be aware of the short-term risks associated with interest rate fluctuations and competition.

Disclaimer

This analysis is based solely on the information provided in CDL Hospitality Trusts’ FY 2024 financial report. This recommendation is not financial advice, and investors should perform their own due diligence or consult with a financial advisor before making investment decisions.

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