CDL Hospitality Trust - CIMB Research 2016-01-29: Singapore RevPAR to remain under pressure

CDL Hospitality Trust - CIMB Research 2016-01-29: Singapore RevPAR to remain under pressure CDL HOSPITALITY TRUSTS CDLHT J85.SI 

CDL Hospitality Trust - Singapore RevPAR to remain under pressure 

  • CDL-HT’s 4Q15 DPU of 3.01 Scts was within our expectation, at 29% of our fullyear forecast. FY15 DPU of 10.06 Scts formed 84% of our FY15 forecast. 
  • For 4Q15, Singapore RevPAR fell 7% yoy in a competitive market. Occupancy dropped 3.5% pts to 86.5%. 
  • Maldives recorded 31% yoy decline in 4Q15 RevPAR 
  • Japan & UK partially softened the weakness. 
  • We see downside risks to our Singapore RevPAR assumptions. Downgrade to Hold. 

■ 4Q15: Singapore and Maldives continue to hurt 

  • CLD-HT reported a 4% decline in 4Q15 DPU to 3.01Scts on the back of a 2% dip in NPI to S$37.8m. 
  • The negatives stem from Singapore, Maldives and a weaker A$. 
  • Maiden contribution from the UK as well as Japan partially softened the weakness. There was a S$1.1m capital distribution from Japan hotels. 
  • Going forward, distribution plan for the Japan hotels would occur semi-annually. 
  • The REIT booked a S$30m devaluation loss mainly for its Singapore and Australia properties (mostly a function of currency swings). 

■ Singapore: Little respite from supply pressures 

  • Singapore’s 4Q15 NPI declined by 2% yoy as occupancy dropped 3.5%pts to 86.5% (3Q15: 90.2%) while ARR dropped 2.9% to S$199. As a result, RevPAR fell 7% yoy to S$172 (3Q15: S$181). 
  • Claymore registered steady 80% occupancy though we expect some gestation period. Looking to 1Q16, though better calendar events are penciled in (with the Singapore Airshow in Feb in the frame of things), we deem that China’s slowdown and incoming c.4,000 rooms for 2016 would continue to pressure RevPAR. 

■ Maldives continues to be weak 

  • Maldives resorts recorded 31% and 19% declines in RevPAR for 4Q15 and FY15 respectively. This was mainly due to devaluation of Rmb, and weaker euro and Russian rouble, making the Maldives a more expensive travel destination. 
  • We believe that resorts would have to re-price their room rents to attract visitors. 

■ Japan & UK partially softened the weakness 

  • Driven by record visitor arrivals in Japan, Japan hotels recorded 18% growth in RevPAR. 
  • For 2015, the country registered a 47% yoy increase in foreign visitors to a record 19.7m, led by a 107% increase in Chinese arrivals. 
  • Meanwhile Hilton Cambridge made its maiden contribution of S$2.3m to 4Q15 NPI (c.6% of the NPI). 
  • Australia and New Zealand suffered from weaker currencies vs. S$. 
  • On the bright side, the REIT’s hotel in Auckland, New Zealand wrote a strong underlying performance. 

■ Downgrade to Hold with lower target price of S$1.34 

  • We lower our Singapore RevPAR assumptions as we see downside risks from China’s slowdown, coupled with the high base effect (Chinese visitors grew by 21% in 9M15 and now make up 14% of arrivals, the second largest group), as well as fiercer competition in the mid-tier segment. 
  • We downgrade the stock to Hold from Add, with a lower DDM target price as we update for a higher equity discount rate (8.9% vs. prev. 8.6%).

LOCK Mun Yee CIMB Securities | YEO Zhi Bin CIMB Securities | 2016-01-29
CIMB Securities SGX Stock Analyst Report HOLD Downgrade ADD 1.34 Down 1.59