CDL Hospitality Trust - CIMB Research 2015-10-29: Mixed results

CDL Hospitality Trust - CIMB Research 2015-10-29: Mixed results CDL HOSPITALITY TRUSTS CDLHT J85.SI 

CDL Hospitality Trust - Mixed results 

  • Pressured by Singapore and ANZ, 3Q DPU declined 9.7% yoy to 2.36 Scts, making up 23% of our FY15 forecast. 
  • Singapore operations are competitive, though RevPAR showed qoq growth. 
  • Outlook for Maldives and Australia performance to remain weak. 
  • Contributions from Hilton Cambridge to be felt from 4Q15. 
  • Maintain Add with lower DDM-based target price of S$1.59. 


Singapore and ANZ continue to be a drag 

  • CDL-HT reported a 9.7% decline in 3Q15 DPU to 2.36 Scts on the back of a 2.2% dip in NPI to S$33.1m. 
  • Maiden income from Japan hotels, higher NPI from Maldives and increased rental income from Claymore Connect were eroded by poorer performance in Singapore and Australia, New Zealand as well as one-off trust expense from the acquisition of the Cambridge City Hotel in the UK. 

Singapore operating conditions remain competitive 

  • Singapore hotel operating conditions remain challenging, with RevPAR sliding 5.7% yoy to S$181. While occupancy grew to 90.2%, room rates remained soft on new supply and weaker corporate demand. 3Q15 RevPAR is 4.6% higher qoq and management guided that Oct RevPAR will be c.1.4% higher yoy, indicating some stabilisation but with higher supply of new hotel rooms, we expect any improvement to remain muted. 
  • Claymore Connect is currently 81% occupied and is expected to deliver steady recurrent income. 

Weak outlook for Maldives... 

  • Overseas contributions have been and will likely continue to be impacted by forex volatility. 
  • Weakness in the natural resources sector will continue to weigh on demand at hotels in Australia. 
  • Maldives hotels reported an 18.3% decline in 3Q RevPAR and is likely to remain adversely impacted by slower tourist arrivals due to the slowdown in Chinese luxury travel and weakening of the Russian rouble. 

...offset by growth in Japan and new income from Hilton Cambridge 

  • Japan hotels experienced a 30.9% jump in RevPAR in 3Q and the strong foreign tourist arrival outlook will continue to underpin the upbeat performance in the country. 
  • Maiden contributions from Cambridge City Hotel UK will be felt in 4Q15. CDL-HT plans to rebrand this hotel into the Hilton Cambridge in Dec this year and we anticipate this to further boost the hotel’s trading performance. The hotel was purchased at an annualised 1H15 NPI yield of c.5.6%, with room to increase to 6-7% yield post a recent AEI. 

Maintain Add 

  • We lower our FY15-17 DPU by 0.26%, as we trim our RevPAR assumptions for Singapore hotels. Hence, our DDM-based target price drops to S$1.59. 
  • CDL-HT offers investors an FY16 DPU yield of 7.9% and 13% upside potential to our target price. 
  • At the current share price, we believe that much of the muted hotel outlook has been priced in. 
  • We maintain our Add call.


LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-10-29
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 1.59 Down 1.64


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