CDL HOSPITALITY TRUSTS
J85.SI
CDL Hospitality Trusts 3Q16 - RevPAR decline to continue
Highlights
- CDL Hospitality Trusts (CDREIT) reported a 10.5% YoY increase in 3Q16 DPU mainly due to inorganic growth contribution from its newly acquired Hilton Cambridge Centre and better performance from New Zealand hotel.
- Singapore and Maldives hotel performance remained soft with NPI declining 6.3%/6.7% YoY respectively due to weak market conditions.
- DPU rose a smaller 3.4% YoY on the back of higher finance costs associated with acquisition and forex differences.
- The results were in-line with expectations accounting for 71% of FY16F.
- 4Q16 DPU is expected to be higher propped up by distribution from Japan hotels which occur only twice yearly in 2Q and 4Q.
- Gearing rose marginally qoq to 36.7% (2Q16:36.3%) while borrowing costs remained steady at 2.4%. About 61% of the loans are currently at fixed rates.
Key Takeaways
- Looking ahead, we expect Singapore RevPAR weakness to persist in 4Q16 as supply remains high offsetting any demand increase. Corporate budget cuts and resilient SGD is also expected to negatively impact room rates.
- 3Q16 RevPAR declined 7.2% YoY with Average Room Rates (ARR) declining steeply by 7.5% YoY. Occupancies improved marginally by 0.5ppt to 90.7%. F1 season performance was weak in line with drop in ticket sales. Travel advisories due to Zika Virus also had a slight impact on Sep performance. During 9M16, Singapore accounted for 62% of total NPI.
- We also expect a weak performance ahead from Maldives hotels as strengthening USD and slowing chinese visitors continues to negatively impact hotel performance. 3Q16 RevPAR from Maldives resorts declined by 28.8% YoY due to the above mentioned reasons.
- New Zealand and Japan remains as a bright spot in CDREITs portfolio. However NPI contribution from these geographies remains small at 12% and are not expected to have a significant impact to DPU.
- We maintain our Neutral recommendation on the stock as we expect CDLHT to see continued impact from supply pressures and weaker demand in its key operating markets.
- Key upside catalyst is a pickup in global corporate demand and yield accretive acquisitions.
Vijay Natarajan
RHB Invest
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http://www.rhbinvest.com.sg/
2016-10-31
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