CDL Hospitality Trusts - RHB Invest 2015-12-02: More Chinese Tourists Does Not Mean More Money

CDL Hospitality Trusts - RHB Invest 2015-1202: More Chinese Tourists Does Not Mean More Money CDL HOSPITALITY TRUSTS CDLHT J85.SI 

CDL Hospitality Trusts (CDREIT SP) - More Chinese Tourists Does Not Mean More Money 

  • Most believe that the recent Chinese tourist surge in Singapore could potentially be a catalyst to hoteliers. 
  • Maintain SELL and DDM-derived SGD1.14 (14% downside), as we note that the influx of Chinese arrivals does not translate into higher RevPAR. 
  • In addition, we expect CDLHT’s Maldives exposure to remain challenging as Chinese luxury spending continues to slow down in the midst of a weaker China economy. 


 Increase in China arrivals, but negative RevPAR growth. 

  • The consensus holds the view that the recovery in the number of Chinese tourists to Singapore could potentially be a catalyst to CDL Hospitality Trusts (CDLHT). 
  • Though we recognise that there is a surge in the number of arrivals from April-August (in the c.22-c.58% YoY range), we also note that this does not translate into higher revenue for hoteliers such as CDLHT. 
  • For the same period, revenue per available room (RevPAR) declined in a negative c.1-c.9.8% YoY rage. This is evidence to us that the influx of Chinese arrivals does not necessarily equate to a better performance for hoteliers. 

 Surge in Chinese arrivals may not be as high as thought. 

  • The seemingly high growth in the number of Chinese arrivals may be due to a low base. In comparison to 8M13, prior to a “forced shopping ban” introduced in Oct 2013, Singapore welcomed a total of c.1.7m Chinese tourists. 
  • In the 8M15 period, the nation only managed to attract c.1.5m arrivals. This represents a 15.5% decline. 
  • Therefore, the larger increase in the number of Chinese arrivals may be overhyped. 

 Lacklustre in Australia and the Maldives too. 

  • Apart from the unfavourable supply demand dynamics within the Singapore hospitality scene, we too, think that CDLHT’s exposure to Australia and the Maldives is likely to prove to be a disappointing one. 
  • The weaker AUD would be a drag to the trust’s overall portfolio. Meanwhile, CDLHT’s Maldives portfolio is likely to face further headwinds as we expect the slowdown in luxury spending by Chinese visitors to persist. 
  • The key risk to our forecasts would be a recovery in tourist arrivals and accommodation spending. 

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

  • Contrary to most opinions, our team believes that CDLHT is not in a favourable position as we expect current challenges to persist into next year. 
  • Maintain SELL.


Ivan Looi RHB Research | Ong Kian Lin RHB Research | http://www.rhbinvest.com.sg/ 2015-12-02
RHB Research SGX Stock Analyst Report SELL Maintain SELL 1.14 Same 1.14


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