CDL Hospitality Trusts: Earnings Recovery and Strengthened Balance Sheet Support Buy Rating into FY26

DBS analyst Geraldine Wong maintained a Buy rating on CDL Hospitality Trusts today and set a price target of S$1.00.

Geraldine Wong has given his Buy rating due to a combination of factors that point to an earnings recovery and improved financial profile from FY26 onwards. While FY25 distributions and DPU declined on higher operating costs, renovation downtime, and the absence of prior tax rebates, second-half results already showed a clear rebound as revenue and NPI picked up once asset enhancement works began to taper. The completion of major refurbishments at W Singapore and Grand Millennium Auckland by end-2025 is expected to drive stronger NPI contributions in 2026, complemented by resilient performance in Japan, Australia, and UK long-stay assets that are already operating at high occupancy levels with further room for income growth. Wong also highlights the healthier balance sheet, with lower gearing, reduced average funding costs, and a higher proportion of fixed-rate debt, which together mitigate interest-rate risks and support more stable distributions.
Wong’s constructive view is further underpinned by CDL Hospitality Trusts’ growth pipeline, notably the forward purchase of Moxy Singapore Clarke Quay at an appealing per-key valuation relative to recent market deals and an underwritten yield in the mid-5% range, with potential upside if cap rates compress. Management’s disciplined approach to capital allocation—prioritising funding for Moxy through a combination of perpetuals and debt while keeping equity issuance and new acquisitions in check—adds confidence that growth will not come at the expense of balance sheet strength. With expected RevPAR expansion in Singapore, a full-year uplift from completed AEIs, and additional interest savings yet to be fully realised, Wong views FY26 as a transition year to stronger earnings momentum. On this basis, she maintains a Buy recommendation with a target price of SGD1.00, reflecting her expectation of total return upside as fundamentals and cash flows improve.

Wong covers the Real Estate sector, focusing on stocks such as Centurion Accommodation REIT, Ascott Residence, and CDL Hospitality Trusts. According to TipRanks, Wong has an average return of 5.4% and a 68.57% success rate on recommended stocks.