• Limited financials were provided in this business update. 1Q25 gross profit rose 4% YoY, driven by improved operating performance and contributions from new properties, which offset the lost income from divestments. Excluding acquisitions and divestments, gross profit rose 1% YoY.
• 1Q25 portfolio RevPAU increased 4% YoY to S$141 due to higher average occupancy of 77% (1Q24: 73%). Two DPU-accretive acquisitions (1.6%) were made in Japan in 1Q25, namely Ibis Styles Tokyo Ginza and Chisun Budget Kanazawa Ekimae, at a blended NOI yield of 4.3%.
• Maintain BUY with an unchanged DDM-TP of S$1.05. We lower our FY25e/26e DPU estimates by 4% to account for downtime from upcoming AEIs. CLAS remains our top pick in the sector, supported by its mix of stable (70%) and growth income sources and geographical diversification, which enhance resilience amidst potential weakness in consumer sentiment from global uncertainties. We expect mid-single-digit portfolio RevPAU growth in FY25e, driven by improving occupancy and six AEI completions in FY24. CLAS has over S$300mn in prior divestment gains on its balance sheet, which the manager may deploy to offset the absence of contributions from assets undergoing AEIs. The current share price implies an FY25e dividend yield of 7%.

• FY24 DPU of 6.10 Singapore cents (-7% YoY) was in line with our FY24e estimates. Excluding one-off gains, the core DPU of 5.49 Singapore cents increased by 1% YoY, driven by stronger operating performance, acquisitions, and completed asset enhancement initiatives (AEIs). However, this was partially offset by divestments, ongoing AEIs, higher financing costs, and the depreciation of foreign currencies against the Singapore Dollar.
• 4Q24 portfolio RevPAU increased 9% YoY to S$176 despite the high base, reaching 113% of pre-Covid 4Q19 levels. This was driven by a higher average occupancy of 81% (4Q23: 77%) and increased average daily rates (ADR) across the portfolio. Over S$500mn in assets were divested at a premium to book value in FY24, unlocking S$74mn in net gains.
• Maintain BUY with a higher DDM-TP of S$1.05 (prev. S$1.04) as we roll forward our forecasts. We lower our FY25e DPU estimates by 3% on higher finance costs assumptions. CLAS remains our top pick in the sector, supported by its mix of stable and growth income sources and geographical diversification, which enhance resilience amidst global uncertainties. We expect mid-single-digit portfolio RevPAU growth in FY25e, driven by improving occupancy, with overseas assets offsetting softer demand in Singapore due to the absence of major concerts. CLAS still holds over S$300mn in previous divestment gains on its balance sheet, some of which will be utilized in FY25e to offset the absence of contributions from assets that will be undergoing AEIs. The current share price implies an FY25e dividend yield of 7%.

• Limited financial details were provided in this business update. 3Q24 gross profit rose 8% YoY, driven by stronger operating performance and portfolio reconstitution initiatives, which included S$350mn in acquisitions and S$500mn in divestments at premium to book value YTD. Excluding acquisitions and divestments, gross profit rose 2% YoY.
• 3Q24 portfolio RevPAU increased 3% YoY to S$158 despite the high base, reaching 105% of pre-Covid 3Q19 levels. This was due to a higher average occupancy of 79% (3Q23: 77%), which was 92% of pre-Covid levels. Revenue from France grew 11% YoY, driven by the Paris Olympic Games.
• Maintain BUY with an unchanged DDM-TP of S$1.04. There has been no change in our estimates. CLAS remains our top pick in the sector owing to its mix of stable and growth income sources and geographical diversification, which provide resilience amidst global uncertainties. We have not factored in any capital gain top-ups from previous divestment gains in FY24e; any top-ups would represent potential upside. RevPAU YoY growth has reached its lowest level since 2Q21. We expect mid-single-digit portfolio RevPAU growth in FY25e, driven by improving occupancy, with overseas assets helping to offset softer demand in Singapore due to the absence of major concerts or events like Coldplay and Taylor Swift. The current share price implies an FY24e/25e dividend yield of 6.6%/7.1%.

▪ 1H24 DPU of 2.55 cents (-8% YoY) was in line with expectations and formed 43% of our
FY24e forecast, with seasonally stronger performance expected in the second half of the
year. 1H24 revenue increased by 11% YoY due to stronger performance of the existing
portfolio and contributions from new acquisitions, partially offset by divestments and
foreign currency exchange. Despite stable distributable income YoY, DPU was down due
to the enlarged share base from the equity fundraising exercise in 3Q23.
▪ 2Q24 portfolio RevPAU rose 4% YoY on a high base to S$155, reaching 102% of pre-
COVID 2Q19 levels. This was attributable to higher room rates; 2Q24 average portfolio
occupancy was stable YoY at 75%.
▪ Maintain BUY with an unchanged DDM-TP of S$1.04. We increase our FY24e/25e DPU
estimates by 1%/4% on stronger operating performance in Japan and France, partially
offset by higher interest expense. CLAS remains our top pick in the sector owing to its
mix of stable and growth income sources and geographical diversification, which provide
resilience amidst global uncertainties. Growth in RevPAU going forward will be driven
by portfolio occupancy as average daily room rates (ADR) stabilise. The current share
price implies an FY24e/25e dividend yield of 6.6%/7.1%.

• No financials were provided in this business update. 1Q24 gross profit rose 15% YoY due to stronger operating performance and contributions from new properties. It was 7% higher YoY on a same-store basis.
• 1Q24 portfolio RevPAU rose 6% YoY to S$135, in line with pre-COVID 1Q19 levels. 1Q24 average portfolio occupancy was stable YoY at 73%, and it was at 88% of pre-COIVD levels.
• Upgrade from ACCUMULATE to BUY with an unchanged DDM-TP of S$1.04 due to the recent share price performance. FY24e DPU is slightly lowered by 2% on higher interest costs assumptions. CLAS remains our top pick in the sector owing to its mix of stable and growth income sources and geographical diversification, which provide resilience amidst global uncertainties. Growth in RevPAU going forward will be driven by portfolio occupancy as ADR stabilises. The current share price implies an FY24e/25e dividend yield of 6.6/6.8%.

The Positives

• 1Q24 RevPAU grew 6% YoY to S$135, in line with pre-pandemic 1Q19 pro-forma RevPAU mainly due to higher ADRs. Average portfolio occupancy was stable YoY at 73% - it was down 4ppts QoQ due to seasonality. RevPAU for CLAS’s five key markets in Australia, Japan, Singapore, UK, and the USA continued to improve YoY (see Figure 1) and exceed pre-COVID 1Q19 levels on a same-store basis (excluding units under renovation).

• Strong capital management. Gearing and interest cover remained healthy at 37.7% and 3.7x, respectively. CLAS’s effective borrowing cost increased 60bps QoQ to 3%, mainly due to a higher proportion of GBP and EUR debt arising from the new acquisitions. Despite this increase, CLAS’s borrowing costs remain relatively low compared to those of its industry peers. 82% of debt on a fixed rate. Additionally, we think CLAS will recall its S$150mn, 3.88% perpetual bond at its first call date in Sep 24 to save on interest costs. Gearing will remain below 40% even if debt fully funds this.

• Portfolio recycling is in full swing. In Jan 2024, CLAS acquired Teriha Ocean Stage, a rental housing property in Fukuoka, Japan, for JPY 8bn with an estimated net operating income yield of 4% on a stabilised basis. Five properties were divested in 1Q24, and they were Courtyard by Marriott Sydney-North Ryde in Australia, Hotel WBF Kitasemba East, Hotel WBF Kitasemba West and Hotel WBF Honmachi in Osaka, Japan, and Citadines Mount Sophia Singapore. All assets were divested at a premium above book value, locking in net gains of over S$25mn. Proceeds from the divestments have been used to par down higher interest rate debt.

The Negatives

• Nil

• FY23 DPU of 6.57 cents (+16% YoY) exceeded our expectations by 11.7% due to a one-off realised exchange gain. Excluding one-off items, adjusted DPU increased 14% YoY to 5.44 cents, which was 93% of our forecast.
• 4Q23 portfolio RevPAU rose 4% YoY to S$161, reaching 103% of pre-COVID 4Q19 levels mainly due to higher average daily rates (ADR). Average portfolio occupancy was stable QoQ at 77% (4Q22: 78%), and it was at 92% of pre-COIVD levels.
• Downgrade from BUY to ACCUMULATE with an unchanged DDM-TP of S$1.04 as we roll forward our forecasts. FY24e/FY25e DPU is raised by 3%/6% after lowering our interest costs assumptions. CLAS remains our top pick in the sector owing to its mix of stable and growth income sources and geographical diversification. Growth in RevPAU going forward will come from higher portfolio occupancy, as ADR growth would slow from the high base. The current share price implies an FY24e/25e dividend yield of 6.5/6.8%.

The Positives

• 4Q23 RevPAU grew 4% YoY to S$161, reaching 103% of pre-pandemic 4Q19 pro-forma RevPAU mainly due to higher ADRs. Average portfolio occupancy was stable QoQ at 77% (4Q22: 78%). RevPAU in Australia, Japan, Singapore, UK and USA continued to exceed pre-COVID 4Q19 levels on a same-store basis. Japan saw a spike in RevPAU by 90% YoY after its re-opening to independent leisure travellers in Oct 2022. Performance in China and Vietnam continued to improve, with RevPAU at 86% and 88% of 4Q19 levels respectively.

• Proactive capital management. Gearing and interest cover remained healthy at 37.9% and 4x, respectively. CLAS’s effective borrowing cost remained unchanged at 2.4% QoQ, with 81% of debt on a fixed rate. We expect the FY24 cost of debt to increase to c.2.9% after refinancing 18% of its total debt (c.S$563mn) due in FY24. A 50bps increase in CLAS’s borrowing cost will impact full-year DPU by 0.08 Singapore cents.

• Higher portfolio valuation. CLAS’s portfolio valuation rose 2% as stronger operating performance and outlook mitigated the impact of higher discount and cap rates across all markets (except for Japan). Markets with valuation gains include Australia, Europe, Japan, Singapore, and UK. Separately, CLAS is divesting Citadines Mount Sophia Singapore for S$148mn, 19.4% above book value. The exit yield for this transaction is 3.2%, and CLAS will recognise a net gain of c.S$14.6mn. The divestment is expected to be completed in 1Q24.

The Negatives

• Nil

• 3Q23 gross profit rose 13% YoY to reach 103% of pre-COVID 3Q19 levels.
• 3Q23 portfolio RevPAU rose 17% YoY to S$154, reaching 102% of pre-COVID 3Q19 levels on the continued improvement in portfolio occupancy (77% vs 70% in 3Q22) and average daily rates (ADR). We expect effective borrowing cost to rise from 2.4% in 3Q23 to c.3% for FY24e after refinancing all loans due in FY24.
• Upgrade from ACCUMULATE to BUY due to recent share price performance, DDM-TP lowered from S$1.20 to S$1.04. FY23e/FY24e DPU is lowered by 6%/14% after accounting for the higher share base (+9%) from the equity fund-raising exercise, proposed acquisitions, and higher finance costs. CLAS remains our top pick in the sector owing to its mix of stable and growth income and geographical diversification. Growth in RevPAU going forward will come from higher portfolio occupancy. The current share price implies an FY23e/24e dividend yield of 6.6%.

The Positives

• 3Q23 RevPAU grew 17% YoY to S$154 reaching 102% of pre-pandemic 3Q19 pro-forma RevPAU. Average daily rates (ADRs) remained above pre-COVID levels, while occupancy improved 2ppts QoQ to 77% in 3Q23 (3Q22: 70%). All markets experienced RevPAU growth YoY (see Figure 1), with Singapore, Australia, USA, UK, and Japan performing above pre-COVID levels. Japan saw a spike in RevPAU by 198% YoY after its re-opening to independent leisure travellers in Oct 2022. Performance in China and Vietnam continued to improve, with RevPAU at 80% and 84% of 3Q19 levels respectively. The stabilisation of the newly rebranded The Robertson House, which saw a 30% increase in room rates during early-bird sales, will provide further uplift to revenue from Singapore once renovation works complete in 1Q24.

• Resilience from stable income sources. All 7 French master leases due in 2023 have been renewed in Oct 23 with total projected rents to be c.28% above existing rents under the new structure. Occupancy at the rental housing properties remained stable at >95%. 4Q23 will be the first full quarter contribution for Standard at Columbia, the student accommodation development in South Carolina, USA, which began receiving students from Aug 23 and was >90% occupied upon opening.

• Proactive capital management. CLAS’s effective borrowing cost remained unchanged at 2.4% QoQ. The percentage of loans on fixed rate increased from 80% to 83% QoQ, and interest cover remained healthy at 4.2x. Gearing improved from 38.6% to 35.2% QoQ after proceeds from the EFR in Aug 23 were partially used to pare down loans maturing in FY23 and higher floating rate debt, pending deployment into acquisitions in 4Q23. We expect FY24 cost of debt to increase to c.3% after refinancing 18% of its total debt (c.S$496mn) due in FY24 denominated in EURO, USD and JPY. A 0.6% increase in CLAS’s borrowing cost to 3% will impact full-year DPU by 0.1 Singapore cents.

The Negatives

• Nil

No financials were provided in this business update.

• 1H23 DPU of 2.78 cents (+19% YoY) was in line with expectations and formed 43% of our FY23e forecast, with seasonally stronger performance expected in the second half of the year. Excluding one-off items relating to realised exchange gain from the repayment of foreign currency bank loans and settlement of cross currency interest rate swaps, DPU increased 37% YoY.
• 2Q23 portfolio RevPAU rose 20% YoY to S$149, reaching 98% of pre-COVID 2Q19 levels on the continued improvement in portfolio occupancy (75% vs 70% in 2Q22) and average daily rates (ADR).
• Downgrade from BUY to ACCUMULATE, DDM-TP trimmed from S$1.26 to S$1.20. FY23e/FY24e DPU is lowered by 4%/6% on higher interest assumptions. CLAS remains our top pick in the sector owing to its mix of stable and growth income and geographical diversification. The current share price implies an FY23e dividend yield of 5.7%.

The Positives

• 2Q23 RevPAU grew 20% YoY to S$149 and is at 98% of pre-pandemic 2Q19 pro-forma RevPAU. YoY improvement was driven by both higher average daily rates (ADRs), which is up c.12% YoY in 2Q23, and higher occupancy of 75% in 2Q23 (2Q22: 70%). All markets experienced RevPAU growth YoY (see Figure 1), with Singapore, Australia, USA, UK, and Japan performing above pre-COVID levels. Japan saw a spike in RevPAU by 247% YoY after its re-opening to independent leisure travellers in Oct 2022. Performance in China and Vietnam strengthened and are currently at 78% and 83% of 2Q19 levels respectively.

• Portfolio reconstitution strategy. During the quarter, CLAS entered into conditional sale and purchase agreements to divest 4 properties in France for €44.4mn (S$63.4mn) to a third party. The price is at a 63% premium to book value and an exit yield of c.4%, unlocking a net gain of €0.2mn (cS$0.3mn). The expected completion of this divestment is in 4Q23. Standard at Columbia, the student accommodation development in South Carolina, USA, has obtained its temporary certificate of occupancy and is ready to receive students for the academic year 2023-24. It has a pre-committed occupancy of 87%. CLAS also has five properties that are currently undergoing AEIs to enhance return, as well as the redevelopment of Somerset Liang Court which is expected to complete in 2H25.

• Effective capital management. Including capitalised interest, CLAS’s effective borrowing cost remained unchanged at 2.4% QoQ. The percentage of loans on fixed rate increased from 75% to 80% as CLAS entered into more interest rate swaps during the quarter. Gearing improved marginally from 38.7% to 38.6% QoQ, leaving c.S$1.8bn of debt headroom for CLAS to reach its medium-term asset allocation of 25-30% for longer-stay accommodation (currently at c.19%). We expect cost of debt to increase marginally as CLAS refinances 13% of its total debt (c.S$372mn) due at the end of 2023 denominated in JPY, AUD and EURO. A 10bps increase in benchmark rates will impact full-year DPU by 0.02 Singapore cents.

The Negatives

• Nil

Outlook

Forward bookings remain healthy, supported by the strong demand from both international and domestic travel. We expect international travel to pick up pace as airline capacity increases – it has not fully recovered to 2019 levels. As corporates seek to optimize their expenses, many are downgrading from luxury to more cost-effective mid-tier mass market accommodation options. CLAS stands to benefit as the bulk of its portfolio comprises properties within the mid-tier segment, making it an attractive choice for cost-conscious corporate clients.

We forecast growth in ADRs to moderate as it has already surpassed pre-pandemic levels in some markets, and the driver for RevPAU growth going forward will be from higher occupancy. Portfolio occupancy at 75% is roughly 90% of pre-COVID occupancy.

Downgrade from BUY to ACCUMULATE, DDM-based TP lowered from S$1.26 to S$1.20.

FY23e/FY24e DPU is lowered by 4%/6% on higher interest cost assumptions. 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 CLAS for its balanced mix of stable and growth income sources, which stands at 58% and 42% of gross profit in 1H23 respectively. The current share price implies a FY23e dividend yield of 5.7%.

• No financials were provided in this business update. 1Q23 gross profit was 59% higher YoY, and 97% of 1Q19 pre-COVID-19 levels. Portfolio RevPAU spiked 90% YoY to S$127 and is at 93% of pre-pandemic 1Q19 pro forma RevPAU.
• 1Q23 effective borrowing cost at 2.4% (4Q22: 1.8%) is still lower than many of its peers.
• Maintain BUY, DDM-TP unchanged at S$1.26. CLAS remains our top pick in the sector owing to its mix of stable and growth income and geographical diversification. The current share price implies a FY23e dividend yield of 6%.

The Positives

• 1Q23 RevPAU grew 90% YoY to S$127 (1Q22: S$67, 4Q22: S$155) and is at 93% of pre-pandemic 1Q19 pro forma RevPAU. YoY improvement was driven by both higher average daily rates (ADRs), which is up c.35% YoY in 1Q23, and higher occupancy of c.70% in 1Q23 (1Q22: 50%, 4Q22:78%). All markets experienced strong RevPAU growth YoY (see Figure 1), with Singapore, Australia, USA, and Japan RevPAU at or above pre-COVID-19 levels. Japan saw a spike in RevPAU by 351% YoY after its re-opening to independent leisure travellers in Oct 2022, with Tokyo properties registering ADRs that surpassed 1Q19 levels. Growth drivers for RevPAU going forward are in China and Vietnam which are currently at 68% and 81% of 1Q19 levels, respectively.

• Extended stay segment remains resilient, comprising c.19% of 1Q23 gross profit. Occupancy of the longer stay properties remained stable at >95%. Student accommodation continues to be resilient with 98% leased for the academic year 2022-2023 (vs 95% last academic year), with rent growth of c.6% YoY. Longer-stay accommodation offers income stability while hospitality assets capture growth from travel recovery.

The Negative

• Higher interest expense. Including capitalised interest, CLAS’s effective borrowing cost increased from 1.8% to 2.4% QoQ, and the percentage of loans on fixed rate decreased from c.78% to c.75%. Gearing increased marginally from 38% to 38.7% QoQ, leaving c.S$1.7bn of debt headroom for CLAS to reach its medium-term asset allocation of 25-30% for longer-stay accommodation (currently at c.19%). Cost of debt is expected to increase further when CLAS refinances 14% of total debt, or about S$400mn, which is due at the end of 2023. A 50bps increase in benchmark rates will impact full-year DPU by 0.1 cents.

Outlook

Forward bookings remain healthy, supported by the strong demand from both international and domestic travel. Corporate travel and business activity continue to be robust, despite some industries facing cost pressures. As of January 2023, global airlines are operating at only 11% of their 2019 capacity levels to and from China. This is expected to increase to 25% by April 2023. China is a key source market for travellers to many countries, and the return of flight capacity is expected to drive outbound travel. In 2019, Chinese travellers accounted for approximately 9% of CLAS' guest count (about 4% in 1Q23) and we think this percentage will increase in the second half of 2023.

We forecast growth in ADRs to moderate as it has already surpassed pre-pandemic levels in some markets, and the driver for RevPAU growth going forward will be from higher occupancy. CLAS’ revenue growth has outpaced the increase in operating costs - electricity costs have increased, but it remains less than 10% of OPEX.

• FY22 DPU of 5.67 cents (+31%) was in line with our forecast, supported by new acquisitions and the recovery of travel.
• 4Q22 portfolio RevPAU rose 78% YoY to S$155, reaching pre-pandemic 4Q19 levels on continued improvement in portfolio occupancy (78% vs 60% in 4Q21) and average daily rates (ADR).
• Maintain BUY, DDM-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 owing to its mix of stable and growth income and geographical diversification. The current share price implies a FY23e dividend yield of 5.9%.

The Positives

• 4Q22 RevPAU grew 78%/17% YoY/ QoQ to S$155, reaching pre-pandemic 4Q19 pro forma RevPAU. YoY improvement was driven by both higher average daily rates (ADRs), which is up c.37% YoY in 4Q22, and higher occupancy of 78% in 4Q22 (4Q21: 60%). All markets experienced strong RevPAU growth YoY (see Figure 1), with Singapore, Australia, US and UK RevPAU at or above pre-COVID-19 levels. Management guided that the growth drivers for RevPAU in 2023 were in China, Japan, and Vietnam which are currently at 80%, 73% and 78% of 4Q19 levels, respectively.

• Portfolio valuation remained stable. CLAS reported a gross fair value gain of c.S$200mn despite higher capitalisation and discount rates used across all markets (with the exception of Japan), due to the stronger operating performance and improving outlook of the portfolio. Across most markets, capitalisation rates increased by 25-50bps. Markets with valuation gains included those with RevPAU above normalised levels such as Singapore, Australia, USA and UK (3 – 7% YoY increase).

• Prudent capital management, with c.78% of debt on fixed rate, locked in for a weighted average of c.4 years. CLAS’ cost of borrowing remained low for the quarter at 1.8%, with an interest cover of 4.4x. Gearing of 38% means a debt headroom of c.S$1.8bn, leaving room for CLAS to reach its medium-term asset allocation of 25-30% for longer-stay accommodation (currently at 19%). Only 14% of total debt, or about S$400mn, is due for refinancing in 2023. CLAS expects average borrowing costs for the full year 2023 to be around 2.05%. A 50bps increase in benchmark rates will impact full-year DPU by 0.1 cents.

The Negative

• Foreign exchange headwinds continue to impact DPU. The impact of foreign exchange after hedges in place on gross profit was 2.8% for FY22. CLAS adopts a natural hedge wherever possible by borrowing in the currency of the underlying assets. A 5% depreciation in foreign currency implies a c.3% impact to DPU.

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%.