CDL Hospitality Trusts - RHB Invest 2016-05-03: 1QFY16 Results Flash Note

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CDL HOSPITALITY TRUSTS CDLHT J85.SI 

CDL Hospitality Trust - 1QFY16 Results Flash Note

• We make no change to our BUY rating, forecast and DDM-derived TP (CoE: 8.1%, Tg: 1.0%) of SGD1.48, FY16 dividend yield of 7.3%.

Highlights

• 2Q16 DPS declined 9.0% YoY, meeting c.22% of our full year forecasts.
• The shortfall in distribution income was mainly due to 
  1. softer trading condition in Singapore & Maldives markets, 
  2. the increase in interest costs, and 
  3. forex losses
• Its SG portfolio’s RevPar was down c.7% YoY, as a result of new hotel supply, and uncertain global economic growth.
• However for the first 27 days of Apr 16, RevPar for its SG hotels was up 1.0% YoY.

Other takeaways

• Management expects the outlook for the hospitality sector to remain uncertain, as the Chinese economy is expected to slow down.
• Tourist arrivals in Singapore (YTD Feb) grew c.12% YoY mainly due to high growth in Chinese and Indonesian arrivals.
• On its Singapore hotels, AEI works at Grand Copthorne Waterfront Hotel and M Hotel affected performance.
• On its overseas hotels (RevPAR):
• Maldives: -28.7% YoY, mainly due to cautious consumer sentiments towards discretionary spending in high-end leisure markets Japan: +7.5% YoY, mainly due to growth in visitor arrivals into the market (YTD Mar: +39.9% YoY)
• UK: +7.3% YoY, mainly fuelled by the refurbishment and rebranding of the hotel (Hilton Cambridge City Centre)
• Gearing ratio stood at 36.7%, with a healthy interest coverage of 6.0x.

Our View

• We remain our optimism in CDLHT in spite of the softer first quarter earnings. In our opinion, the weakness in the Singapore portfolio will not prolong as we find the high growth in the visitor arrivals numbers (YTD Feb: + c.12%) highly encouraging. Additionally, we also note that CDLHT reported 1.0% growth in its RevPAR in April.
• With new events, such as ISMRM and SpineWeek, taking place in the 2Q16, we are confident that CDLHT would benefit from the increasing number of business events this year.

Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-03

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.48 Same 1.48