CDL Hospitality Trusts CDREIT - UOB Kay Hian 2017-04-27: 1Q17 Results In Line

REITs − Singapore - UOB Kay Hian 2017-04-27: 1Q17: Results Of CDREIT (In Line) CDL HOSPITALITY TRUSTS J85.SI

REITs − Singapore - 1Q17: Results Of CDREIT (In Line)

  • CDREIT’s results are in line with expectations. Singapore hotel RevPAR dipped 0.8% yoy in 1Q17. 
  • Management remains cautious on the domestic hospitality scene. 
  • Maintain HOLD on CDREIT with an unchanged target price of S$1.47. 
  • Maintain OVERWEIGHT on the sector.


  • CDL Hospitality Trust (CDREIT) has reported quarterly results.


CDL Hospitality Trust (CDREIT SP/HOLD/ S$1.51/Target: S$1.47)

  • Results in line with expectations; maintain HOLD with an unchanged target price of S$1.47, based on two-stage DDM (required rate of return: 7.4% and terminal growth rate: 1.4%). 
  • 1Q17 gross revenue and NPI saw respective increases of 3.9% and 6.4% yoy, due to higher variable income on improved performance from its New Zealand asset (Grand Millennium Auckland). The NZ hotel’s lease structure was converted from a largely fixed rent structure, to one with higher variable rent. 
  • 1Q17 DPU of 2.42 S cents (+9.0% yoy) was in line with expectations, forming 26.1% of our full-year estimates

Supply-side pressure and lacklustre corporate demand weighing on Singapore portfolio. 

  • Singapore hotels (69.1% of total AUM) saw 1Q17 RevPAR dip 0.8% yoy, as the decline in average daily rate of 5.9% yoy offset occupancy growth of 4.5ppt yoy.
  • Management attributed the dip in RevPAR to tepid corporate activity, particularly for the O&M and Financial sectors, as well as price competition due to new supply of hotel inventory.

Singapore Hotel trading performance decline in April due to seasonal factors. 

  • For the first 24 days of Apr 17, CDREIT's Singapore hotel portfolio RevPAR declined by 8.7% yoy. This was likely attributable to the lack of biennial events occurring this month, such as the Food & Hotel Asia event. 
  • Management opined that Easter falling on April this year as opposed to March last year could also have been a contributing factor to slower trading performance as corporate demand typically slows during holidays.

Overseas asset performance. 

  • CDREIT’s New Zealand asset registered respective RevPAR and NPI growth of 27.6% yoy and 90.2% yoy in 1Q17, after the REIT manager commenced a new lease structure in Sep 16. 
  • The Maldives properties registered RevPAR growth of -8.8% yoy in 1Q17. This was attributed to supply-side pressure on rates and competitive pricing by peer hoteliers. Management intends to pursue cost containment strategies (labour and utilities) in the Maldives. 
  • The UK registered RevPAR growth of 17.9% yoy in 1Q17, although the weaker GBP against the SGD led to NPI contributions declining 2.2% yoy. Management expects growth in leisure travel from a weaker GBP, which allows for greater variable income contribution from a thriving hospitality scene.

Cautious on domestic outlook

  • Cautious on domestic outlook, with management pointing to a more tepid events calendar (lacking biennial events like the Singapore Airshow and Food & Hotel Asia) in 2017. In addition, corporate travel (O&G and finance) remains subdued. 
  • We understand that CDREIT has been accepting Chinese leisure travellers, with corporate clientele now accounting for less than 50% of the overall (historically > 55%).
  • Likely indigestion pangs from 2017’s supply glut, with about 3,767 rooms slated to come on-stream, representing a 5.9% increase over 2016’s supply. 
  • Mid-tier (41% of total) and upscale/luxury (46% of overall) room supply would account for about 87% of rooms in 2017, according to consultant Horwath HTL.

Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-04-27
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.470 Same 1.470
HOLD Maintain HOLD 1.800 Same 1.800