This should be my last action for the year as I tried to wrap up 2016 and preparing for the new upcoming and exciting year.
I accumulated CDL Hospitality Trust for 33,000 shares at a price of $1.31. Together with the existing I have, I now own 40,000 shares of CDLHT. This becomes immediately my top holding going into 2017.
I last added CDLHT back in October and you can see my article here.
My main thesis for hospitality reits continued to grow stronger as I see decline of revpar slowing down (revpar bottoming) despite influx of incoming supply which has been factored in, discount to historical valuations which I find attractive, and stronger tourist demand coming in from the weaker SGD , completion of terminal 4 and continued initiative from the tourism board to grow on these aspects.
Out of all the hospitality reits around, CDLHT remains my strongest pick because of the quality of the hotels, stronger pipeline, healthier balance sheet, and most resilient revpar (despite the drop) as compared to the others.
The Singapore hotels revpar is currently hovering at around $156, while during the GFC period it was at around $150. At the highest, this can go to as high as $200. I think a lot of the weaknesses and bad news have been factored in the share price and again the important thing is about not overpaying.
Buy low. Sell high.
Buy when there is pessimism. Sell when everyone is getting onboard and crowded.
There’s a few reasons why I didn’t consider the other hospitality reits.
I’ve spoken previously quite extensively on Ascott here. Even though their service residence business model is more resilient than traditional hotel stay, I just find that the management interests’ are getting ahead of the minority shareholders without really adding apple to apple value. You can read my articles above if you’d like to understand what I mean. For now, I just keep my small ascott holdings intact in my portfolio as I don’t want to incur the commission fees by selling it away.
OUE Hospitality Trust is also a big no-no for me. Anything that has to do with the parents, I’d avoid generally as they tend to use it more for dumping ground purpose than anything else. Forget about their huge discount to nav. Look instead at their leases, the quality of their assets and the cap rates that they are getting from their assets. Not good enough.
The same goes for Far East Hospitality Trust. Huge discount to nav, that’s good contrarian play. But they have not shown enough to convince that they are bringing any sort of added value to shareholders. Not for me too.
Both Fraser Hospitality Trust and Ascendas Hospitality Trusts are more catered towards Australian tourism play. In terms of M&A, the management has not totally convince that they are out there fighting for the best deal. It seems more towards buying first for now and the accretive part might come at a later stage. I’d give this a pending review for now but the yield has not convinced me to part with this.
The above is of course forms my own opinion and they might or might not be biased towards what I’ve seen and analyzed from my angle.