CDL Hospitality Trust (CDREIT) - UOB Kay Hian 2017-07-31: 2QFY17 Results Above Expectations

CDL Hospitality Trust (CDREIT) - UOB Kay Hian 2017-07-31: 2QFY17 CDREIT Results (Above Expectations) CDL HOSPITALITY TRUSTS J85.SI

CDL Hospitality Trust (CDREIT) - 2QFY17 CDREIT Results (Above Expectations)

  • Results of CDREIT above expectations. CDREIT’s management is on the lookout for acquisitions in Singapore, Australia, the UK and Germany post the recent equity fund-raising. 
  • Maintain HOLD with an unchanged target price of S$1.62.
  • Maintain OVERWEIGHT on the sector.



WHAT’S NEW


Results marginally above expectations; maintain HOLD with an unchanged target price of S$1.62, based on two-stage DDM (required rate of return: 7.4% and terminal growth rate: 2%). 

  • 2Q17 gross revenue and NPI saw respective increases of 12.7% and 11.4% yoy, due to contributions from the newly-acquired Lowry Hotel in Manchester, UK and from the New Zealand Hotel due to higher variable rental income from strong hotel performance. 
  • 1Q17 DPU of 2.08 S cents was down 3.7% yoy due to the dilutive effects of the rights issue. 
  • The results were marginally above our expectations with 1H17 DPU excluding rights of 4.91 S cents (+10.1% yoy) accounting for 52.9% of full-year estimates.

Still seeing a competitive environment in Singapore. 

  • Management remarked that the Singapore hospitality market remained competitive due to strong price competition in the market and the absence of the Food & Hotel Asia event. Despite this, there was a marginal growth in occupancy, but RevPAR decreased marginally by 1.4% yoy.
  • Management envisions that supply-side pressure will continue, with a 4% yoy growth in room stock, as compared with end-16.

Looking forward to an Olympics driven turnaround in Japan. 

  • Although RevPAR in Japan declined by 4.2% yoy due to the high price sensitivity of the economy accommodation market in Tokyo, occupancies remained strong. However, management holds a positive outlook on their Japanese portfolio, as they look forward to the Olympics and relaxed visa requirements for Chinese tourists.

Sharp declines in RevPAR in the Maldives with a 16.3% yoy decline. 

  • This was largely due to declining tourism demand from China and pricing pressures within the market.
  • Management has been working to improve the market mix and also taken on cost containment measures.

Uncertainty in the UK. 

  • Although Hilton Cambridge City Centre recorded a 2.8% yoy growth in RevPAR, The Lowry Hotel in Manchester experienced a decline in RevPAR due to the Manchester bombings. Uncertainty remains in the UK with the outcome of EU exit negotiations and its effects on corporate demand.

49% RevPAR growth yoy in New Zealand. 

  • This was due to the strong line-up of sporting events, including World Masters Games and the British and Irish Lions Rugby Tour and an increase in international air services.

On the lookout for acquisitions. 

  • From the enlarged debt headroom from the rights issue, management has said they are looking to pursue suitable acquisitions in Singapore, Australia, UK and Germany.




Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-07-31
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.620 Same 1.620



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