CDL Hospitality Trusts gets a DPU kick from The Lowry

SINGAPORE (May 8): DBS is maintaining its “buy” call on CDL Hospitality Trusts with a revised target price of S$1.75, translating to 13% capital upside and 6.4% yield.

This comes after last week’s announcement the manager is buying The Lowry Hotel in Manchester for £52.9 million (S$94.7 million or RM292.25 million) and on a 7.3% proforma FY16 NPI yield.

Including stamp duty and fees, the total acquisition costs stands at £53.8 million.

In a Monday report, analyst Ho Pei Hwa says The Lowry provides CDREIT exposure to a city that has a higher than average GDP growth and is undergoing major development projects.

The hotel also sees strong demand given two leading football clubs — Manchester United and Manchester City — are located in the city.

The hotel is synonymous with the Manchester United Football club, given manager Jose Mourinho and the coaching team reside in the hotel while the team will bunk in the hotel a day before playing home games to arrive at Old Trafford in good shape.

The property was only recently refurbished in 2015 and 2016, and reported a 6.9% y-o-y increase in RevPAR. Average daily rate and occupancy were reported to be at £160 and 80% respectively.

In terms of geographic exposure by NPI, CDREIT’s presence in the UK will rise from 6% to 11%, with the contribution from Singapore dropping from 62% to 59%.

“We are generally positive on the acquisition given the DPU accretion as well as helping CDREIT buffer its earnings near term due to the headwinds in Singapore and Maldives,” says Ho.

“We believe with CDREIT tempering the downside risk to earnings this year with the acquisition of The Lowry Hotel, at current levels, CDREIT offers an attractive entry point to an expected recovery in the Singapore hospitality market next year,” she adds.

Units of CDREIT are up 3 Singapore cents at S$1.57. —

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