• COVID-19 impacted all segments, hotel operations accounted for 82% of decline in revenue due to closure of 28% of hotel inventory and lower RevPAR (-56.6%) and lower sales value from few units sold from mass market projects in 1H20 vs ultra-luxury projects in 1H19.
• Refreshing portfolio and unlocking additional GFA through redevelopment of Fuji Xerox and Central Mall.
• Maintain BUY with lower TP of S$10.68, after factoring in the protracted recovery in the hospitality segment. FY2020/21e EPS was cut by 26.1% and 7.2% respectively.

The Positives

+ Respectable 356 units sold in SG in 1H20 (-29.5%, 1H19: 505 units), despite 10 weeks of showroom closures. Sales value was 68.8% lower at $514.7K (1H19: $1.55mn), contributed by mass-market projects with lower margin, in contrast to the ultra-luxury projects sold in 1H19. CDL replenished its landbank in Jan20 through the successful tender of the GLS at Irwell Bank (540 units, est. launch 1H21). The Group will launch its JV project, Penrose Drive (566 units) in 3Q20.

+ Unlocking additional GFA through redevelopment of Fuji Xerox and Central Mall. Tapping on the CDB Incentive Scheme, plans for Fuji Xerox Towers’ redevelopment includes a 25% GFA uplift, with demolition works slated for 2H21. Plans for Central Mall include a 240K sq ft uplift in GFA, with a 70% commercial and 30% hotel or serviced apartment component. Plans for both developments are still pending approvals from the URA.

The Negatives

– All segments impacted by COVID-19; Hospitality segment hardest high with losses expected to continue despite cost cutting measures implemented. The Hospitality segment recorded a pre-tax loss of $208.2mn due to the temporary closure of 28% of the Group’s 152 hotels, $33.9mn in impairment losses on 8 hotels (6 in US, 1 in UK and 1 in Europe), and $7.0mn in doubtful receivables for 2 hotels which have payment difficulties due to COVID-19. RevPAR was down 56.6% as global hotel occupancy fell to 39.4%. The management guided that losses for this segment are likely to continue for the rest of the year due to the muted global recovery in international tourism.

Outlook

Following the privatisation of Millennium & Copthorne (M&C) and acquisition of 51.0% stake in Sincere Property Group (Sincere), the Group is focused on streamlining and restructuring operations. More divestment can be expected as expected as the Group reviews possible divestments of non-core hotel assets and China retail asset.

CDL is still eyeing the listing of a UK commercial REIT, which may materialise after the market volatility subsides, likely in 2021.

Maintain BUY with lower TP of S$10.68 (prev. S$11.82).

We cut our FY20e/21e EPS by 26.1% and 7.2% to factor in the protracted recovery in the hospitality segment. Our TP is lowered by 10.2% to $10.68.