CDL Hospitality Trusts - OCBC Investment 2016-01-29: Subdued quarter, but valuations attractive

CDL Hospitality Trusts - OCBC Investment 2016-01-29: Subdued quarter, but valuations attractive CDL HOSPITALITY TRUSTS CDLHT J85.SI 

CDL Hospitality Trusts: Subdued quarter, but valuations attractive 

 4Q15 DPU fell 3.8% YoY 
 Outlook remains uncertain 
 See value at current price level 

4Q15 results met our expectations 

  • CDL Hospitality Trusts (CDLHT) reported its 4Q15 results which came in within our expectations. 
  • Although gross revenue rose 11.1% YoY to S$50.1m, NPI and DPU fell 2.2% and 3.8% to S$37.8m and 3.01 S cents, respectively. 
  • CDLHT’s performance was impacted by continued softness in the tourism industry here, as its Singapore hotels’ RevPAR dipped 7.0% YoY to S$172. This was in turn driven by a YoY fall in both occupancy (-3.5 ppt to 86.5%) and average room rate (-2.9% to S$199). 
  • The overall double-digit YoY revenue increase was driven largely by the maiden contribution from its Hilton Cambridge City Centre Hotel, which was acquired on 1 Oct 2015. 
  • We expect this hotel to be the main growth driver for CDLHT in 2016, given a full-year of contribution and healthy RevPAR growth following the completion of its refurbishment (4Q15 RevPAR jumped 20.8% YoY). 
  • For FY15, CDLHT’s gross revenue increased 3.4% to S$172.4m, and was 0.7% higher than our full-year forecast. 
  • DPU of 10.06 S cents represented a decline of 8.4%, but was ahead of our projection by 2.2%. 

Outlook still largely challenging 

  • Looking ahead, CDLHT remains cautious on the outlook of its portfolio hotels given the uncertain macroeconomic landscape. 
  • Although 2016 will see the return of biennial events to Singapore such as the Singapore Airshow and new events such as the HSBC World Rugby Sevens Series, the projected 6.4% increase in new supply (~3,930 rooms) will likely exert downward pressure on industry room rates, in our view. 
  • Maldives is also expected to remain challenging, while UK, Japan and New Zealand are expected to perform well. 

Maintain BUY 

  • We fine-tune our assumptions after inputting this latest set of full-year figures in our model. 
  • Our FY16 DPU forecast is lowered slightly by 0.4%. Rolling forward our valuations, we derive a lower fair value estimate of S$1.38 (previously S$1.41). However, we are keeping our BUY rating on CDLHT, as we see value at current price level. 
  • The stock offers FY16F distribution yield of 8.0%, which comes in at two standard deviations above its average 5-year mean of 6.7%.

Wong Teck Ching Andy CFA OCBC Securities | 2016-01-29
OCBC Securities Analyst Report BUY Maintain BUY 1.38 Down 1.41