Is CDL Hospitality Trust A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of CDL Hospitality Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To March 2025

Business Description

CDL Hospitality Trust is a hospitality REIT that was listed in 2006 and owns multiple hotels worldwide.

What I Like About CDL:

The portfolio is well-positioned and diversified globally.
Strong sponsor provides stability and opportunities for future acquisition and capital recycling.

What I Do Not Like About CDL:

A large share of the distribution per unit is supported by non-operational items such as management fees paid in units. This makes valuation difficult as the intrinsic value based on operational performance alone is quite different from the intrinsic value derived from the reported performances. (Figure 7)

Updates From Recent Performance (FY 2024)

General Comments:

Management expanded and executed their mandate into the living asset class to secure stable, long-term growth.
DPU From Operations decreased by 6.61% because of higher operating expenses and financing costs, which outpaced the growth in rental revenue. This is partly due to The Castings still being in its gestation phase which resulted in its NPI being insufficient to compensate for one-off pre-opening expenses and associated interest costs.
The performance of CDL overseas portfolio hotels is expected to vary in the near term, as some markets have stabilised, while others are in the process of recovery.
Financial health has worsened with the gearing ratio deteriorating by 4% to 40.70%. This came despite a year-over-year decrease in borrowing costs of 0.2% to 4.0%. (Figure 5)

Positive Headwinds:

The Casting performances are expected to stabilize by 3Q 2025 which, alongside other recent acquisitions, would further contribute to the top-line performances.

Negative Headwinds:

Global economic uncertainty might put a damper on global tourism demand which may result in lower occupancy and revenue for the hospitality industry.
A potential higher for longer interest rate environment might result in a prolonged higher financing cost for CDL as around 34% of their current debt is due for refinancing in 2025.

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