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

CDL HOSPITALITY TRUSTS (SGX:J85)

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.

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.

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%.

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.

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 | https://research.itradecimb.com/ 2019-04-30

SGX Stock Analyst Report ADD MAINTAIN ADD 1.85 UP 1.800