Brokers' take: Analysts raise CDLHT target price on hospitality and travel rebound

CDL Hospitality Trusts : J85 0% (CDLHT) continues to be seen as a major beneficiary of the rebound in tourism, with analysts revising their estimates to account for an improving outlook.

Analysts from DBS Group Research, OCBC Investment Research, Maybank Securities and RHB have raised their target prices on CDLHT, implying a potential upside of between 10.7 and 18.3 per cent from the counter’s trading price of S$1.31 as at 1.13 pm. CDLHT stapled securities were trading 3.7 per cent or S$0.05 lower at the time.

DBS on Friday (May 5) raised its target price on CDLHT to S$1.55 from S$1.40, implying a potential upside of 18.3 per cent. The new target price is 1.15 times the DBS’s net asset value (NAV) estimates, which is 1 standard deviation above its historical trading range.

“We see positives from a multi-year acceleration in revenue per available room (RevPAR), driving price-to-NAV multiples higher, and a 25 per cent compound annual growth rate (CAGR) in FY2022-24 distribution per unit (DPU),” said DBS analysts Geraldine Wong and Derek Tan.

OCBC revised its estimates and increased its fair value estimate for CDLHT to S$1.45 from S$1.30, implying a potential upside of 10.7 per cent.

RHB, meanwhile, increased its target price to S$1.30 from S$1.25, implying a potential downside of 0.8 per cent. The research team noted that positives are mostly priced in, with the counter rebounding 15 per cent year to date.

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CDLHT is also trading at a slight premium to book value with a 4.5 per cent yield. RHB added that it has lifted its estimates for FY2023-24 DPU by 2 per cent to factor in a slightly more optimistic outlook next year.

Three out of 4 research teams have a “buy” rating on CDLHT while RHB maintained a “neutral” call on the counter.

Maybank Securities on Tuesday upgraded CDLHT to “buy” from “hold”, rating the stapled group as the best S-Reit proxy for hospitality sector recovery. It also raised its target price to S$1.45 from S$1.20, implying a potential upside of 10.7 per cent.

With stronger RevPAR, the research team has also raised its DPU estimates by 5-15 per cent. It noted that risk-reward is favourable, with an estimated 5.5 per cent FY2023 DPU yield and 25 per cent 2-year DPU CAGR.

“We see long-haul travel recovery determining its earnings trajectory, with risk on the upside, given better-than-expected pricing power, against rising demand,” Maybank said.