The Positives
The Negative
Outlook
Extended stay segment remains resilient, comprising c.15% of 4Q22 gross profit. Occupancy of the longer stay properties remained stable at >95%. Student accommodation continues to be resilient with 99% leased for the academic year 2022-2023 (vs 95% last academic year), with above market rent growth of c.6% YoY. Longer-stay accommodation offers income stability as the hospitality properties capture growth from recovering markets.
Forward bookings remain healthy, supported by the recovery of both short and long-stay corporate travel. Although there is not much increase in bookings from Chinese tourists, inquiries are strong. In 2019, Chinese travelers contributed about 9% of CLAS’ guests count (3% in 2022), and we expect this to pick up in 2H of 2023.
CLAS can raise room rates to abate rising utility and labor costs. Electricity cost increased but remain <10% of OPEX. Electricity charges are passed through to tenants in US student accommodation and Japan rental housing properties, while utility usage above a certain threshold will be passed through to guests in long-staying SRs.
Four properties will be undergoing enhancements in 2023. They include Riverside Hotel Robertson Quay, which will be rebranded as The Robertson House by The Crest Collection, Citadines Holborn-Covent Garden London, Citadines Les Halles Paris and Citadines Kurfürstendamm Berlin.
Maintain BUY, DDM-based TP raised from S$1.13 to S$1.26.
FY23e-FY25e DPU is raised by 1-3% on the continued recovery for hospitality and the reopening of China. Our cost of equity decreased from 8.34% to 7.96% as we roll forward our forecasts. CLAS remains our top pick in the sector with its geographically diversified portfolio, wide range of lodging asset classes, stable income base which has proven its resilience through COVID-19, and a strong sponsor. We also like that CLAS has a good mix of stable and growth income sources of 52% and 48% of 2H22 gross profit, respectively. The current share price implies a FY23e dividend yield of 5.9%.
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Darren has over three years of experience on the buy-side as a fund manager. During his time as fund manager, he has managed multiple funds and mandates including dividend income, growth, customised, Singapore focused and regionally focused funds. He graduated from the University of London with a First-Class Honours degree in Banking and Finance.
