DBS Vickers upgraded CDL Hospitality Trusts to ‘buy’ from ‘hold’ and raised its target price to S$2.11 from S$2.01, citing benefits from its acquisition of a resort in Maldives.
By 0341 GMT, units of CDL Hospitality Trust were up 1.8 percent at S$1.98. The units have gained 5.3 percent since the start of the year, compared to the FTSE ST Real Estate Industrial Trust’s 1 percent gain.
CDL Hospitality said it entered into an agreement with Banyan Tree Holdings Ltd to buy Angsana Velavaru in Maldives, which it will lease back to the operator for 10 years.
DBS said this will give the trust exposure to the robust growth in Maldives’ hospitality market, supported by growing popularity among Chinese tourists.
“While this is different from its current portfolio of largely city-hotels, we believe that the merits of this deal overweigh potential risks,” said DBS in a note.
The 10-year lease has rental payments pegged to gross operating profits and incentives motivates the operator to achieve the highest possible returns for the property, DBS said.