consistently so. Dun know why October seems to come under attack from shortists.

Figure 1) 3Q/2019 vs 3Q/2024


2) Share price 2020-2024 Oct to Nov

 

Revenue for the quarter is down 3.7 per cent on the year at S$67.5 million

 

CDL Hospitality Trusts : J85 -0.54% (CDLHT) posted a net property income (NPI) of S$36.3 million for the third quarter ended Sep 30, down 6.8 per cent from S$39 million in the previous corresponding period.

 

Revenue for the quarter was down 3.7 per cent on the year at S$67.5 million.

 

The declines were mainly due to a normalisation of pent-up post-pandemic travel demand, as well as a mixed revenue per available room (RevPar) performance across its portfolio markets, said the managers on Tuesday (Oct 29).

 

RevPar across its portfolio markets logged gains, except for Singapore, New Zealand, United Kingdom and Italy. Other markets in its portfolio include Australia, Japan, Maldives and Germany.

 

RevPar for its Singapore hotels fell 10.3 per cent on the year, led by a fall in average room rate of 8.2 per cent. Occupancy inched down two percentage points on the year to 84.9 per cent in Q3 2024.

 

&ldquo Demand continued to normalise after a period of exceptional average rate growth in 2023,&rdquo said the managers.

 

They added: &ldquo Despite an increase in visitor days of 6.9 per cent, the incremental demand was likely absorbed by new hotel supply. Shorter booking windows have been observed for Chinese travellers.&rdquo

 

NPI of the group&rsquo s main market in Singapore was down 5.5 per cent at S$23.8 million, mainly due to normalisation of hotel trading performance.

 

In Japan, RevPar measured in the local currency rose 16.6 per cent on the year &ndash buoyed by the continued increase of international visitors. In Q3 2024, Japan had 9.1 million visitors, up 36.6 per cent from the previous corresponding period, noted the managers.

 

NPI rose 8.8 per cent year on year despite the depreciation of the Japan yen against the Singapore dollar.

 

&ldquo Positive trends for Japan&rsquo s tourism sector are likely to continue in the near term due to the country&rsquo s strong appeal as a travel destination, despite the rebound of the yen from extremely weak levels,&rdquo said the managers.

 

For the nine months ended September, the stapled group, which comprises CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust, posted 2.9 per cent growth in revenue to S$194.8 million.

 

The growth was partially offset by lower contributions from hotels in New Zealand, due to the absence of nine Fifa Women&rsquo s World Cup games hosted by the city last year, as well as room refurbishment which reduced the number of available rooms.

 

NPI for the nine months was S$102.9 million, inching up 1 per cent on the year, driven by the Singapore, Australia, Japan and Germany portfolios, which collectively grew by S$3 million year on year.

 

As at end-September, CDLHT&rsquo s gearing stood at 38.8 per cent, with S$707 million debt headroom to 50 per cent gearing. Its weighted average debt to maturity was about two years.

 

The group has cash reserves of about S$68.3 million and S$210.4 million of committed revolving credit facilities available to fund working capital needs, said the managers.

 

Market outlook

They noted that in Q3 2024, the group&rsquo s existing term loan facilities were refinanced as sustainability-linked term loans for a tenor of five years, thus increasing the total sustainability-linked facilities to S$477.2 million.

 

Refinancing for the remainder of the maturing loans in Q4 2024 is expected to be completed before the end of the year, said the managers.

 

&ldquo With expectations of further rate cuts by major central banks, CDLHT is well-positioned to benefit from potential interest rate reductions when they occur,&rdquo they added.

 

Looking ahead, the managers expect CDLHT&rsquo s overseas portfolio to continue to grow at different paces given the varying market conditions.

 

&ldquo The Auckland market remains challenging, primarily from increased competition as room supply outstrips demand, which remains shy of pre-pandemic levels, a sluggish economy, and the increase of the international visitor levy and prices for visitor visas,&rdquo they said.

 

&ldquo Despite the rebound of the yen from extremely weak levels, inbound demand for Japan is expected to remain buoyant given its enduring tourism appeal.&rdquo

 

The managers are also positive on China&rsquo s stimulus plans, which they say could &ldquo bode well for discretionary consumer spending such as travel&rdquo .

A total return opportunity not to be missed

• Proposing the acquisition of Hotel Indigo Exeter for GBP 19.4mn, below replacement costs 
• Hotel is a 104-room boutique hotel located in the heart of Exeter City which has recently undergone an extensive refurbishment offering quality specifications
• Potential initial yield of 5.3%-6.0%, according to our estimates, with upside towards the 7%-8% upon stabilisation, a value accretive deal in our opinion.  
• An attractive total return opportunity, BUY, TP SGD 1.20

 

What&rsquo s new

CDL Hospitality Trust (CDLHT) is proposing the acquisition a boutique hotel in Exeter, U.K. The target property &ndash Hotel Indigo for GBP 19.4mn (SGD 33.2mn). The property is an upscale lifestyle hotel offering 104 rooms, with luxurious spa and gym facilities with two retail units. The property was extensively renovated from a department store (formerly known as House of Fraser) and opened in Oct&rsquo 23. The property is located within the heart of Exeter City Centre. The manager has commissioned an independent valuer which has given a &ldquo market value&rdquo for the hotel to be GBP 19.5mn (as of 30th Sept24) and will fund this acquisition with debt. The deal is expected to be accretive to DPU while gearing will rise modestly from 37.7% to 38.4%, still within comfortable limits. 

Our view. 

At a pricing of GBP 184k a key, we understand the price to be below replacement cost, with management decisively pulling the trigger for a hotel with attractive specifications and a &ldquo value opportunity&rdquo to enter the market. Based on the room rates GBP 80-180/night, we estimate that the initial yield could range between 5.2%-6.0% but should see returns heading towards the 7%-8% handle upon stabilisation in the medium term. We believe that this is an attractive total return opportunity for the REIT, which will reap benefits for CDLHT in the medium term. 

The acquisition is predicted to be accretive on stabilisation, says the trusts&rsquo managers

 

CDL Hospitality Trusts : J85 +0.51% (CDLHT) is acquiring an upscale lifestyle boutique hotel in Exeter, England, as well as two retail units in the hotel for about £ 19.4 million (S$33.2 million), its managers announced on Tuesday (Oct 15). 

 

The acquisition is expected to complete once the relevant conditions are met, it said, adding: &ldquo The managers are of the view that the acquisition is in the ordinary course of CDLHT&rsquo s business.&rdquo

 

In total, Hotel Indigo Exeter&rsquo s acquisition is estimated to cost approximately £ 21.5 million. This comprises the purchase price of £ 19.4 million and transactions costs such as stamp duty, an acquisition fee, professional due diligence and advisory fees amounting to about £ 2 million.

 

This will be fully funded through debt, said the managers. 

 

Post-acquisition, CDLHT&rsquo s pro forma gearing as at Jun 30, 2024, will increase from 37.7 per cent to 38.4 per cent. 

 

The acquisition is predicted to be accretive on stabilisation, it said. 

 

The trust, through an indirect wholly owned subsidiary, has also entered into a franchise agreement with InterContinental Hotels Group (IHG), which will come into effect once the acquisition is completed. 

 

Hotel Indigo Exeter will continue to operate under IHG&rsquo s Hotel Indigo brand, said the managers. 

 

Vincent Yeo, chief executive of CDLHT&rsquo s managers, said: &ldquo Hotel Indigo Exeter is a compelling opportunity to acquire a hotel with top tier design and build specifications, at a significant discount to the current replacement cost.&rdquo

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According to an independent external valuer, the freehold property is valued at £ 19.5 million as at Sep 30 &ndash £ 15.5 million for the hotel component and £ 4 million for the retail component. 

 

Yeo added that there are areas in the operations that the managers have identified that will potentially drive better performance there is also a limited new supply of rooms within the city centre for the next few years.

 

He also noted that the acquisition is a continuation of the managers&rsquo strategy of pursuing accretive acquisitions that augments income streams, while increasing their exposure to the burgeoning lifestyle hotel market. 

 

&ldquo We believe our stapled securityholders will benefit from this opportune acquisition, especially at a point when the interest rate cycle is expected to turn,&rdquo said Yeo. 

 

Prior to this acquisition, CDLHT&rsquo s porfolio comprises 20 properties with a total of 4,820 hotel rooms, 352 build-to-rent apartment units, and a retail mall.

 

In the United Kingdom, the trust has three hotels and a residential build-to-rent property.

 

Located in Exeter in the south-west of England, Hotel Indigo Exeter offers 104 rooms, spa and gym facilities, three food and beverage outlets, and two retail units. 

 

It fully opened in October 2023, after undergoing an extensive conversion from a House of Fraser department store. 

 

The existing leases of the two retail units will continue until 2033 on a fixed rent basis with tenant break options in June 2028 and March 2029, respectively, said the managers.