CDL Hospitality Trusts - RHB Invest 2015-10-30: Challenging Environment For Singapore Hoteliers

CDL Hospitality Trusts - RHB Invest 2015-10-30: Challenging Environment For Singapore Hoteliers CDL HOSPITALITY TRUSTS CDLHT J85.SI 

CDL Hospitality Trusts - Challenging Environment For Singapore Hoteliers

  • CDLHT posted negative 3Q15/9M15 DPS growth of 9.6/10.3% YoY, in line with our expectations. 
  • Maintain SELL and a DDM-derived SGD1.14 TP (19% downside). This was mainly on a weak performance by its Singapore hotels (3Q15 RevPAR: -5.7% YoY). 
  • While its Japanese assets did perform, thanks to successful government policies that boosted tourism, they constitute only c.4% of its net property income (NPI). 

 Weak performances were in line with our expectations. 

  • CDL Hospitality Trust’s (CDLHT) 3Q15/9M15 results were within our expectations as it reported negative DPS growth of 9.6% and 10.3% YoY respectively. This met c.71% of our full-year estimates. 
  • CDLHT’s 3Q15/9M15 revenue was up 2.4/0.5% YoY. This was mainly attributable to the acquisition of Japanese hotels in Dec 2014, which translated into a 9% (3Q15) and 9.7% YoY (9M15) decrease in its total income available for distribution. 
  • CDLHT’s gearing ratio rose to 36.5% (2Q15: 32%) due to the recent acquisition of Cambridge City Hotel in the UK. 

 The Singapore portfolio proved to be challenging as revenue/available room (RevPAR) was down 5.7% YoY. 

  • Due to new hotel supply amidst slower global economic growth, room rates within its portfolio suffered a 3.8% YoY drop in average room rate (ARR) of SGD209. 
  • In addition, the prolonged haze situation since early August has also dampened travel to Singapore. 
  • Given that the factors above are expected to persist in the near term, we retain our pessimistic view on Singapore’s hospitality sector. 

 Japanese hotels were the only performing asset in CDLHT’s portfolio. 

  • CDLHT’s assets in Australia, New Zealand and the Maldives were not spared by the weaker global economic environment – booking negative RevPAR growth vis-à-vis their respective previous years. On the other hand, the trust’s Japanese assets registered RevPAR growth of c.21% YoY. This was on foreign visitor arrivals to Japan growing c.49% YTD to 14.5m. 

 Maintain SELL, with an unchanged SGD1.14 TP. 

  • Our team believes that the hospitality industry is likely to remain a challenging one. This is due to the unfavourable supply demand dynamics amidst the slowing down of the global economy. 
  • Maintain SELL.

Ivan Looi RHB Research | Ong Kian Lin RHB Research | 2015-10-30
RHB Research SGX Stock Analyst Report SELL Maintain SELL 1.14 Same 1.14