CDL Hospitality Trusts (SGX: J85) is a stapled trust that consists of a real estate investment trust and business trust. It has a focus on hospitality assets and currently owns a total of 16 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 second quarter of the financial year ending 31 December 2019 (FY19).
Source: CDL Hospitality Trusts Result Presentation
The year-on-year improvement in net property income (NPI) was due to better performance of Pullman Hotel Munich in Germany and hotels in the UK, and inorganic contribution from Hotel Cerretani Florence.
Vincent Yeo, chief executive of CDL Hospitality Trust’s managers, commented:
“CDLHT is undergoing a transition period due to major asset enhancement initiatives which have impacted our overall results for this quarter. The macro economic environment, which has weakened due to ongoing trade conflicts, may continue to weigh on demand in the near term. Against this backdrop, we are encouraged by the resilient performance of our Singapore Hotels, which would have reported an improvement adjusted for room inventory taken out for renovation and improvement works. The benign hotel supply growth in the next few years will provide a constructive environment for a recovery in the Singapore hotel sector.”
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 42 REITs that are in Singapore’s stock market.
Source: Yahoo Finance, OCBC Weekly S-REITs Tracker
We can see that CDL Hospitality Trusts’ valuation is higher than the market average due to its low distribution yield and high PB ratio.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.