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. “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,” they say in a Dec 6 research note.
The appearance of the Omicron variant has waylaid what the analysts view as “green shoots” in recovery, following indicators in 3Q2021 of markets resuming normalcy. Nonetheless, the analysts believe CDLHT’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’s pivot towards the built-to-rent (BTR) sector as a way to seek resilience through diversity and earnings stability post the pandemic. “With a varied demand driver compared to hospitality assets, we believe that the BTR investment is value-accretive and complementary to its portfolio,” 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 “buy” call on the counter.
As at 4.48pm, CDLHT units are up 1 cent or 0.88% higher at $1.15.
