SINGAPORE has announced simplified safe management measures as well as new vaccinated travel lanes (VTL) and increased VTL quotas as the country enters a new phase of dealing with the pandemic and is streamlining border measures.

 

Alongside the calibrated re-opening of borders and economy in the region, Asean countries with relaxed border controls saw international flight bookings increase significantly in Jan 2022. Countries such as Indonesia, the Philippines, Singapore, and Thailand also saw return economy-class bookings from travellers in the United Kingdom, United States and Germany rise 19 per cent to 300 per cent month on month in January, according to data from Skyscanner. Skyscanner also expects airlines to announce new schedules and build capacity to facilitate the return of international travel at scale.

 

In Singapore, Changi Airport passenger movement data has also seen upticks over the past 3 months. More notably, passenger volumes in December 2021 grew over 120 per cent month on month, building on from the 55 per cent month-on-month increase seen in Nov 2021. Despite being just at 15.3 per cent of pre-Covid monthly levels of about 5.7 million (on average across 2017 to 2019), the implementation of VTLs locally have had a positive impact.

 

As Singapore' s border progressively re-opens and the country moves into a new phase of the pandemic, investors' focus may shift towards stocks which potentially benefit from increased international travel, and retail and consumer spending.

 

Listed on the SGX are 12 S-Reits and property trusts which have significant exposure to Singapore related retail and hospitality assets.

 

All 12 trusts generated positive returns in the February month to date, averaging 6 per cent total returns.

 

In the month to date, the top 5 performing retail and hospitality related S-Reits averaged 9 per cent total returns (and 4.8 per cent average total returns on a year-to-date basis). They are CDL HT CDL HTrust: J85 0% (10.7 per cent total returns), CICT CapLand IntCom T: C38U +0.47% (10 per cent), Far East HT Far East HTrust: Q5T 0% (9 per cent), Suntec Reit Suntec Reit: T82U 0% (8.8 per cent) and Frasers HT Frasers HTrust: ACV 0% (6.7 per cent).

 

The 5 saw a combined institutional net buy of S$67.5 million in the year to date.

 

Far East Hospitality Trust reported 28.8 per cent and 23.4 per cent quarter-on-quarter increases in revenue per available room/unit in their hotels and serviced residences respectively in Q42021, citing long-stay corporate sources and loosening of travel restrictions as providing a boost to the hospitality industry.

 

Frasers Centrepoint Trust Frasers Cpt Tr: J69U 0% noted that its portfolio tenants' sales exceeded pre-Covid levels in December 2021 and shopper traffic recovered following the easing of Covid restrictions.

 

Cessation of work from home (WFH) as the default mode from January 2022 is expected to gradually increase shopper traffic.

 

Suntec Reit reported higher occupancy rates for its retail properties and noted that tenant sales recovered faster than footfall and exceeded pre-Covid levels in December 2021.

 

Management expects recovery to be further driven by the return of office workers and easing of safe management measures extended to events.

Australia  borders will reopen to double-vaccinated visa holders from February 21 as COVID-19 cases and ICU admissions continue to decline. 

 

DBS Group Research analysts Geraldine Wong and Derek Tan believe CDL Hospitality Trusts (CDLHT) stands to gain from concerns over the Omicron variant.

 

The way Wong and Tan see it, CDLHT will benefit from an uptick in local staycation demand as border reopenings continue to see delays. &ldquo CDLHT continues to be one of the top beneficiaries to benefit from a staycation demand boost as Singaporeans look locally for holiday options this year-end,&rdquo they say in a Dec 6 research note. 

 

The appearance of the Omicron variant has waylaid what the analysts view as &ldquo green shoots&rdquo in recovery, following indicators in 3Q2021 of markets resuming normalcy. Nonetheless, the analysts believe CDLHT&rsquo s Singapore hotels will likely see an extension of government block bookings to beyond 1Q2022 as a near-term hedge. 

 

The analysts are projecting a softer recovery trajectory of around 70% of pre-Covid-19 levels in 2022, from around 50% of pre-Covid-19 levels in 2021. To that end, they estimate a softer 16% y-o-y growth in distribution per unit in FY2022 on more conservative assumptions.

 

Amidst the uncertain backdrop, Wong and Tan note CDLHT&rsquo s pivot towards the built-to-rent (BTR) sector as a way to seek resilience through diversity and earnings stability post the pandemic. &ldquo With a varied demand driver compared to hospitality assets, we believe that the BTR investment is value-accretive and complementary to its portfolio,&rdquo they remark.

 

Taking into account the updated growth estimates and valuations that have been rolled forward to FY2022 ending December, the analysts have a new target price of $1.40 for CDLHT, up from $1.35 previously. They maintain their &ldquo buy&rdquo call on the counter.

  The improved NPI contribution was mainly from its New Zealand, UK, Germany and Italy hotels and from Angsana Velavaru (pictured) in the Maldives.

CDL Hospitality Trusts (CDLHT) saw a 34.8 per cent rise in net property income (NPI) to $20.5 million for the third quarter ended Sept 30, from $15.2 million the year before.

 

The managers noted that the improved NPI contribution was mainly from its New Zealand, Britain, Germany and Italy hotels, and from Angsana Velavaru resort in the Maldives. The increase, however, was offset by lower NPI from the stapled group' s Singapore and Australia hotels, which declined by $3.4 million year on year for Q3.

 

Meanwhile, gross revenue increased by 32.8 per cent to $40 million. The stapled group' s Singapore, New Zealand, Britain hotels and Maldives resorts contributed $33.8 million, including $9.3 million of fixed rent.

 

The improved performance reflects ongoing recovery from the Covid-19 pandemic, the managers said in a press statement on Friday (Oct 29).

 

" While the pace of recovery varies between regions, there is a discernible pattern of leisure demand leading the recovery with corporate demand being cautious," the managers said.

 

Revenue per available room (RevPAR) for CDLHT' s five Singapore hotels dropped 5.6 per cent to $61 from $64, declining collectively for the Singapore cluster except for W Hotel - which has been buoyed by healthy staycation demand.

 

W Hotel, which is located in Sentosa, continued to serve as the closest proxy to overseas travel that local residents could enjoy, the managers said.

 

CDLHT' s weighted average debt to maturity stood at two years as at Sept 30, 2021. Liquidity " remains robust" with cash reserves of about $130 million and approximately $231.4 million of committed revolving credit facilities available for drawdown.

 

The stapled group also has $368.6 million in short-term uncommitted bridge loan facilities available for acquisitions, the managers said.

 

It pays out distributions on a semi-annual basis, with the amount calculated as at June 30 and Dec 31 each year.

 

CDL Hospitality Trusts (CDLHT) announced on Tuesday that it has entered into a land-purchase agreement and a development-funding agreement to invest in a build-to-rent (BTR) residential property in Manchester, United Kingdom, for a purchase consideration of £ 73.3 million (S$136 million).

 

This is in line with CDLHT' s strategy to strengthen its rental income base and boost its portfolio diversification.

 

Vincent Yeo, chief executive officer of CDLHT' s managers, said: " BTR markets in Manchester and across many cities globally are very resilient, backed by macro trends such as a persistent housing shortage and increases in the house price-to-income ratio, which result in affordability becoming an impediment to home ownership."

 

CDLHT is therefore expecting a growth in rental housing demand and is looking forward to achieving steady rental growth from this investment over time.

 

This transaction is a forward-funding arrangement, which enables CDLHT to invest in a residential BTR property at a fixed-cost, with cash flows managed over the duration of development.

 

The pro forma stabilised net property income yield of the new property is estimated to be 5.1 per cent, which translates to a 2.2 per cent accretion on the FY2020 dividend per share on a pro forma basis.

 

Following the land-purchase agreement, CDLHT has also acquired land and buildings on the south east side of Longacre Street in Ancoats in Manchester, from BTR developer and operator Packaged Living for a consideration of £ 9.5 million.

 

In connection with the land acquisition and under a development-funding agreement, Packaged Living will redevelop the land into a residential BTR building to be known as The Castings.

 

This will cost £ 63.8 million, of which £ 58.2 million will be paid out periodically over the development period the remaining £ 5.6 million will be paid shortly after project completion, expected in May 2024.

 

The Castings is expected to be leased out to a mix of individual residential tenants or families for periods of typically about a year or more.

 

Savills (UK) Limited, an independent valuer, has valued The Castings on a forward-funding basis at £ 76.1 million, which is higher than the purchase consideration of £ 73.3 million, said CDLHT.

 

The Castings will be ready to welcome residential tenants shortly after the building development and furnishing and fit-out are completed. Including the estimated furnishing and fit-out expenses of £ 3.1 million, to be funded by CDLHT, the total project cost is estimated to be £ 76.4 million. The total transaction cost, including all other transaction expenses and professional fees, is £ 78.9 million.

 

Said Mr Yeo: " The Castings marks our maiden foray into an adjacent lodging space. We are executing on our revised principal investment strategy, under which we are pivoting to amplify our growth by increasing our addressable market. We aim to both achieve enhanced income stability and asset class diversification, which takes us beyond geographical diversification of hospitality assets."