CDL Hospitality Trusts (SGX:J85), or CDLHT, was the first hospitality trust to be listed in Singapore. It has a portfolio of 18 properties spread across seven countries, including Australia, Singapore, Germany, Japan, Maldives, United Kingdom and New Zealand. Since its listing in 2006, CDLHT has grown the value of its portfolio of assets from $846 million, comprising just four hotels to its current asset portfolio worth more than $2.6 million.
Despite this impressive track record, the more poignant question for investors is whether shareholder value has increased during this time. If the growth of the portfolio was due mostly to funds raised through rights issues without the accompaniment of organic growth, then there might have been minimal or even negative shareholder growth.
To answer this question, I will take a look at three key performance indicators of the trust – its net property income per stapled security, the distributions per stapled security and the book value per stapled security.
Net property income per stapled security
The trend of net property income per stapled security over the last 10 years will paint a clearer picture of whether the trust has been able to utilise its existing assets to grow shareholder value. It will also give us a better idea of the dilutive effects of any rights issue used to raise funds for new acquisitions.
CDLHT has grown its net property income per security to 12.67 cents in 2017, from 7.28 cents in 2007. This translates to a compounded annual growth rate (CAGR) of 5.7%.
That said, over the more recent history since 2013, net property income per security had decreased from a high of 14.07 cents in 2013. This was largely due to the enlarged security base due to a rights issue and divestment of two assets in the portfolio. There is a silver lining though. Due to the divestments and rights issue, the net gearing ratio of the trust has decreased from 42.6% to 32.6%, allowing it more debt-headroom for yield-accretive acquisitions in the future.
Distributions per stapled security
Likewise, over the past 10 years, distributions per stapled security (DPS) grew from 6.35 cents in 2007 to 9.22 cents in 2017. This represents a CAGR of 3.8%. But like net property income, distributions over the recent years have declined from a high of 10.98 cents in 2014.
Again, this was largely due to the rights issue increasing the security base, and the divestment of two of its properties.
Book value per stapled security
CDLHT’s net asset value had grown from $720 million in 2006 to $1.928 billion in 2017. This translates to a CAGR of 9.4%. Despite an enlarged security base, the net asset value (NAV) per stapled security still increased from $1.031 in 2006 to $1.61 in 2017. That equates to a respectable compounded annual growth of 4.1%.
With the property market in Singapore expected to pick up over the next few years and CDLHT’s portfolio concentrated in Singapore, I believe the overall book value per stapled trust will see further positive revaluations in the future.
The Foolish conclusion and what’s in store for the future
Since its listing, CDLHT has rewarded long-term shareholders by growing both its earnings capacity and book value per security. However, there was a slight downturn in its fortunes in the last few years. Thankfully, these pains may be short-lived as the hospitality sector is once again poised to pick up. The rights issue and divestment of two of its properties have also decreased the gearing ratio of the trust, and has put it in a much better financial position.
With a current debt headroom of $633 million and the likely positive revaluation of some of its Singapore assets, there is a possibility of acquisitions in the near future. If, as anticipated, management is able to make use of this additional capital, we can expect to see DPS and NAV per stapled security return back to growth in the coming years.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own units in any companies mentioned.
Editor's note: There were errors in the CAGR figures in the original article but have since been corrected.