CDL Hospitality Trusts (SGX: J85) is a stapled trust that consists of a real estate investment trust (REIT) and a business trust. It has a focus on hospitality assets, and as of 30 September 2018, owned a total of 15 hotels and two resorts.
There are two things to know about the REIT right now: its latest financial performance and valuation.
Here is a table showing important items from CDL Hospitality Trusts’ financial performance for the third quarter of financial year ending 31 December 2018.
Source: CDL Hospitality Trusts Results Presentation
Revenue and net property income (NPI) fell by 8.8% and 10.2% respectively. The year-on-year decline in NPI was due to closure of three properties for renovation and lower contribution from Singapore, the UK, and New Zealand. As at 30 September 2018, the REIT clocked in a gearing ratio of 33.8%.
Vincent Yeo, chief executive of CDL Hospitality Trusts’ managers, commented the following in the latest earnings update:
“We are experiencing a transitionary period as we are conducting significant refurbishment works for two of our properties and seeking opportunities to recycle capital from our earlier divestment. Looking ahead, our core portfolio in Singapore is poised to benefit from the recovery in the hotel sector. We will continue to focus on executing asset enhancement opportunities to maximize the long term potential of our hotels. For instance, Orchard Hotel, which is the largest hotel in our Singapore portfolio, will see a significantly improved product offering when the asset enhancement works are completed.”
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows CDL Hospitality Trusts’ PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.
Source: SGX StockFacts
We can see that CDL Hospitality Trusts’ valuation is higher than the market average due to the low distribution yield and high PB ratio.
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Editor's note: The valuation table has been updated to reflect the correct figure. Initially, CDL Hospitality Trusts’ distribution yield premium over the average was wrongly stated.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.