CDL Hospitality Trusts - CGS-CIMB Research 2019-04-30: Hoping To Pick Up The Pace Soon


CDL Hospitality Trusts - Hoping To Pick Up The Pace Soon

  • CDL Hospitality Trusts' 1Q19 DPU of 2.09 Scts made up 21% of our FY19F forecast, due to a 2.4% y-o-y drag in RevPAR from room closures and the absence of events.
  • Despite the weak 1Q, management continues to guide for a positive, although lower, 1-3% Singapore RevPar growth for 2019.
  • Maintain ADD call with a slightly higher Target Price of S$1.85 due to changes in cost of equity assumptions.

CDLHT's 1Q19 results below due to a RevPAR decline

  • CDL HOSPITALITY TRUSTS (SGX:J85)'s 1Q19 DPU of 2.09 Scts (-3.7% y-o-y) formed 21% of our FY19F expectations due to a 2.4% y-o-y decline in RevPAR to S$157. This was partially offset by inorganic contribution from Hotel Cerretani Florence and better performance of Pullman Hotel Munich.
  • Overall income available for distribution fell 14.4% y-o-y but this was offset by an increase in capital distribution from the proceeds from the sale of Mercure and Ibis Brisbane.

Singapore RevPAR growth weaker than expected

  • RevPAR declined 2.4% y-o-y due to room closures in Orchard Hotel in 1Q19 for renovation (c.8.6% of room inventory was closed) as well as the absence of biennial Singapore Airshow and a series of events for Singapore’s ASEAN Chairmanship in 2018. Excluding out-of-order rooms inventory, RevPAR would have increased 0.4%.
  • In the first 25 days of Apr 2019, RevPAR in Singapore decreased 3.5% y-o-y. Management has accordingly reduced its industry RevPAR growth forecasts for 2019 from 3-5% to 1-3%.
  • We have baked in a 6.6% Singapore RevPar growth assumption in our forecast taking into account the reopening of the refurbished Orchard Hotel rooms. In terms of sensitivity, a 1% point drop in RevPAR growth assumption would lower our FY19F DPU and Target Price by 0.7%.

Overseas markets show mixed performance

  • Japan Hotels reported a 9.0% RevPAR increase y-o-y due to the reduction in Airbnb supply with future tourist demand likely to be from the 2019 Rugby World Cup and the Tokyo 2020 Olympics.
  • Angsana Velavaru in the Maldives reported a 17.6% y-o-y increase in RevPAR supported by healthy overall tourism arrivals.
  • New supply resulted in a softer market for Auckland leading to a RevPAR decline of 4.8% y-o-y.
  • RevPAR for the UK was lower 4.2% y-o-y due to Brexit uncertainties and dampened events business in the UK.
  • Contributions to NPI for New Zealand, Australia and the UK were affected due to lower New Zealand dollar, Aussie dollar and British pound respectively.

Maintain ADD with a DDM-based Target Price of S$1.85

  • We tweak our FY19-21F DPU estimates to account for the updated occupancy and RevPAR figures. We continue to expect CDL Hospitality Trusts to have a stronger 2H19 due to the completion of Orchard Hotel refurbishment and continued robust performance from its overseas hotels. We also lower our risk-free and terminal growth rates to account for the more dovish interest rate environment.
  • Further positive re-rating catalysts include higher than expected capital distributions and accretive acquisitions.
  • Downside risks include the weaker-than-expected sector recovery.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | 2019-04-30
SGX Stock Analyst Report ADD MAINTAIN ADD 1.85 UP 1.800