Buy Rating for CDL Hospitality Trusts: Potential Market Recovery and Attractive Dividend Yield Amidst Challenges

CGS-CIMB analyst Lock Mun Yee reiterated a Buy rating on CDL Hospitality Trusts (CDHSF – Research Report) on May 2 and set a price target of S$0.87.

Lock Mun Yee has given his Buy rating due to a combination of factors including the potential for recovery in certain markets and the attractive dividend yield. Despite challenges in the Singapore portfolio, which saw a decline in revenue per average room, the analyst sees potential for improvement as room renovations are completed and group bookings increase. Additionally, the UK and Japan markets have shown positive growth, with the UK benefiting from new acquisitions and improved operations, and Japan experiencing an increase in revenue per available room.
Furthermore, the analyst notes that CDL Hospitality Trusts has a relatively low cost of debt and a significant portion of its borrowings are due for refinancing, which could lead to reduced financing costs if interest rates decrease. Although the distribution per share estimates have been lowered due to current challenges, the expected dividend yield remains attractive at 6.5%, providing a compelling reason to maintain a Buy rating. The potential rebound in tourist arrivals is also seen as a key catalyst for future growth.

According to TipRanks, Mun Yee is a 2-star analyst with an average return of -0.5% and a 40.21% success rate. Mun Yee covers the Real Estate sector, focusing on stocks such as Ascott Residence, Keppel REIT, and CDL Hospitality Trusts.

In another report released today, DBS also maintained a Buy rating on the stock with a S$1.10 price target.