CDL HOSPITALITY TRUSTS
J85.SI
CDL Hospitality Trust (CDREIT) - 2QFY17 CDREIT Results (Above Expectations)
- Results of CDREIT above expectations. CDREIT’s management is on the lookout for acquisitions in Singapore, Australia, the UK and Germany post the recent equity fund-raising.
- Maintain HOLD with an unchanged target price of S$1.62.
- Maintain OVERWEIGHT on the sector.
WHAT’S NEW
Results marginally above expectations; maintain HOLD with an unchanged target price of S$1.62, based on two-stage DDM (required rate of return: 7.4% and terminal growth rate: 2%).
- 2Q17 gross revenue and NPI saw respective increases of 12.7% and 11.4% yoy, due to contributions from the newly-acquired Lowry Hotel in Manchester, UK and from the New Zealand Hotel due to higher variable rental income from strong hotel performance.
- 1Q17 DPU of 2.08 S cents was down 3.7% yoy due to the dilutive effects of the rights issue.
- The results were marginally above our expectations with 1H17 DPU excluding rights of 4.91 S cents (+10.1% yoy) accounting for 52.9% of full-year estimates.
Still seeing a competitive environment in Singapore.
- Management remarked that the Singapore hospitality market remained competitive due to strong price competition in the market and the absence of the Food & Hotel Asia event. Despite this, there was a marginal growth in occupancy, but RevPAR decreased marginally by 1.4% yoy.
- Management envisions that supply-side pressure will continue, with a 4% yoy growth in room stock, as compared with end-16.
Looking forward to an Olympics driven turnaround in Japan.
- Although RevPAR in Japan declined by 4.2% yoy due to the high price sensitivity of the economy accommodation market in Tokyo, occupancies remained strong. However, management holds a positive outlook on their Japanese portfolio, as they look forward to the Olympics and relaxed visa requirements for Chinese tourists.
Sharp declines in RevPAR in the Maldives with a 16.3% yoy decline.
- This was largely due to declining tourism demand from China and pricing pressures within the market.
- Management has been working to improve the market mix and also taken on cost containment measures.
Uncertainty in the UK.
- Although Hilton Cambridge City Centre recorded a 2.8% yoy growth in RevPAR, The Lowry Hotel in Manchester experienced a decline in RevPAR due to the Manchester bombings. Uncertainty remains in the UK with the outcome of EU exit negotiations and its effects on corporate demand.
49% RevPAR growth yoy in New Zealand.
- This was due to the strong line-up of sporting events, including World Masters Games and the British and Irish Lions Rugby Tour and an increase in international air services.
On the lookout for acquisitions.
- From the enlarged debt headroom from the rights issue, management has said they are looking to pursue suitable acquisitions in Singapore, Australia, UK and Germany.
Vikrant Pandey
UOB Kay Hian
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http://research.uobkayhian.com/
2017-07-31
UOB Kay Hian
SGX Stock
Analyst Report
1.620
Same
1.620
