Date of Report: September 30, 2024
Broker Name: CGS International Securities
Overview of CDL Hospitality Trust (CDREIT)
CDL Hospitality Trust (CDREIT) is a key player in the hospitality sector, primarily acting as a proxy for Singapore’s hospitality industry. With 66% of its assets under management (AUM) located in Singapore, the trust benefits significantly from the country’s strong demand for hospitality services. As of September 29, 2024, CDREIT was trading at S$0.99, with a target price of S$1.16, and carries an “ADD” recommendation, indicating that the stock is expected to generate returns exceeding 10% over the next 12 months.
Financial Metrics and Valuation
- Price to Earnings (P/E) Ratio:
- 2024F: 14.44x
- 2025F: 21.63x
- 2026F: 21.15x
- Price to Book Value (P/BV) Ratio:
- 2024F: 0.65x
- 2025F: 0.66x
- 2026F: 0.68x
- Dividend Yield:
- 2024F: 5.45%
- 2025F: 6.46%
- 2026F: 6.35%
CDL Hospitality Trust offers a solid dividend yield, with an estimated increase from 5.45% in 2024 to 6.46% in 2025, before slightly tapering to 6.35% in 2026. The trust is trading at relatively low P/E ratios, which makes it attractive for investors seeking value in the hospitality sector.
Singapore Market Strength and Strategic Positioning
CDL Hospitality Trust’s exposure to Singapore’s hospitality market is a significant advantage. With 66% of its AUM situated in this high-demand market, the trust is well-positioned to benefit from the ongoing recovery in travel and tourism. The trust’s properties in Singapore have undergone asset enhancement initiatives (AEIs), which are expected to further boost revenue per available room (RevPAR) as demand across key markets remains robust.
RevPAR Growth and Market Performance
CDL Hospitality Trust has been able to maintain strong RevPAR growth due to favorable market conditions and its strategic asset improvements. In the broader context, the trust has been able to capitalize on increasing international visitor arrivals (IVA), particularly as travel demand from key source markets such as China and Japan continues to recover to pre-pandemic levels. This trend bodes well for sustained RevPAR growth.
Earnings Resilience Through Key Markets
In addition to its significant presence in Singapore, CDL Hospitality Trust also benefits from its diversified portfolio across various markets. Strong demand across its core markets should help sustain RevPAR growth and support the trust’s financial performance. The trust’s focus on high-demand hospitality segments has provided resilience and the ability to adapt to changing market conditions.
Dividend and Income Potential
With its projected dividend yield set to grow from 5.45% in 2024 to 6.46% in 2025, CDL Hospitality Trust remains attractive for income-focused investors. The trust’s ability to generate steady dividend payouts is supported by the strength of its Singapore market presence and its well-managed portfolio of hospitality assets.
Conclusion
CDL Hospitality Trust stands out due to its significant exposure to the robust Singapore hospitality market and its strategic asset enhancement initiatives. With steady RevPAR growth and an attractive dividend yield, CDREIT is well-positioned to deliver strong returns to investors. Its diversified portfolio, combined with favorable market conditions, positions the trust for continued success in the hospitality sector.
