CDL Hospitality Trust - CIMB Research 2018-04-30: 1Q18 First Take ~ SG Improves Slightly; AEIs Unveiled

CDL Hospitality Trust - CIMB Research 2018-04-30: 1Q18 First Take ~ SG Improves Slightly; AEIs Unveiled CDL HOSPITALITY TRUSTS J85.SI

CDL Hospitality Trust - 1q18 First Take ~ Sg Improves Slightly; Aeis Unveiled

  • CDL Hospitality Trust (CDREIT)'s 1Q18 DPU of 2.17 Scts (+7.4% y-o-y) was in line with our and consensus expectations at 22% of our full-year forecast. CDREIT recorded 0.8% y-o-y increase in SG RevPAR.
  • We think the reason why FEHT’s SG RevPAR performance outpaced CDREIT’s is because of the base effect. FEHT’s RevPAR slide was higher than CDREIT’s in 1Q17.
  • Maintain ADD with CDREIT a proxy for the recovering SG hotel market.



Results highlights

  • CDL Hospitality Trust (CDREIT)'s 1Q18 DPU grew 7.4% y-o-y on the back of inorganic contribution from The Lowry Hotel in UK (acquired on 4 May 2017) and Pullman Hotel Munich (acquired on 14 Jul 2017) as well as improved performance from SG. S
  • G hotels recorded 0.8% y-o-y improvement in RevPAR while NPI from Claymore Connect jumped 48% y-o-y. This was partially offset by softer trading performance from Japan, Maldives and Hilton Cambridge properties. 
  • Additionally, fixed rental income was lower from the Australian portfolio due to the divestment of Mercure and Ibis Brisbane on 11 Jan 2018.
  • We note that net finance costs were S$4.7m lower (-43% y-o-y) given savings from lower borrowing costs (the rights issue in Aug 2017 was used to pare down higher interest-bearing debt). Average cost of debt for 1Q18 was 2.1% p.a. (1Q17: 2.4%), with gearing at 33.2%. In addition, CDREIT has distributed S$0.7m of divestments gains (S$5.4m) from Mercure and Ibis Brisbane to mitigate the absence of income.


SG hotels recorded 0.8% y-o-y improvement in RevPAR

  • We observe that CDREIT has, for the third consecutive quarter, pushed rates up (in view of its relatively high occupancy). Accordingly, average room rates (ARR) increased 1.7% y-o-y while occupancy inched down 0.8% pt.
  • We think the reason why FEHT’s (Add, 0.78%) SG RevPAR performance outpaced CDREIT’s in 1Q18 was partly because of the base effect. CDREIT’s RevPAR dipped 0.8% y-o-y in 1Q17 while FEHT’s decreased by 4.6%. 
  • For the first 26 days of Apr, CDREIT booked a 4.1% y-o-y improvement in RevPAR.


Overseas markets: soft spots are Maldives, Japan and Europe

  • While total visitor arrivals increased in Maldives (revival in demand from Europe), new supply growth counterbalanced demand. Additionally, the transition process of Dhevanafushi affected trading performance. As a result, Maldives posted an 18.8% y-o-y drop in 1Q18 RevPAR. The decline in NPI was partially mitigated by the minimal rent for Angsana Velavaru (US$6m p.a.).
  • Japan hotels registered an 8.9% decline in 1Q18 RevPAR as the heavy concentration of more budget-conscious East Asian visitors, along with rising supply, led to rate pressure. Japan was also affected by mild refurbishment of guestrooms.
  • Europe experienced extreme weather conditions in 1Q18. Given this, coupled with the absence of a major biennial event, Pullman Munich recorded a 7.6% RevPAR drop. Hilton Cambridge’s RevPAR decreased 6.5% y-o-y; Lowry booked 6.8% growth.
  • NZ booked 4.3% growth in 1Q18 RevPAR as the market remained healthy. However, we expect growth to moderate given the high base effect (FY17: +46.3%). NPI contribution in S$ was also marginally lower due to a weaker NZ$.


Various asset enhancement initiatives (AEIs) unveiled

  • In SG, the group will renovate guestrooms in Orchard Hotel in 2H18. A phased room refurbishment exercise is also planned for Grand Copthorne Waterfront Hotel in 2H18. 
  • In Maldives, the Dhevanafushi resort will be fully closed from Jun 2018 with a planned reopening in 4Q18 under the ‘Raffles’ brand. Refurbishment is also planned for 28 land villas in Angsana Velavaru in 2018.


ADD maintained

  • Maintain ADD with CDREIT a proxy for the recovering SG market. Our estimates and DDM-based target price (S$1.92) are intact. 
  • We are hosting CDREIT’s post-1Q18 results luncheon for our institutional clients today.





YEO Zhi Bin CIMB Research | LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2018-04-30
SGX Stock Analyst Report ADD Maintain ADD 1.920 Same 1.920



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