CDL Hospitality Trusts - CGS-CIMB Research 2019-07-24: Looking Forward To A Stronger 2H19F


CDL Hospitality Trusts - Looking Forward To A Stronger 2H19F

  • We do not expect a strong turnaround in 2Q due to weak tourist arrivals, renovation in Orchard hotel and opening expenses for Raffles Maldives.
  • FY19-21F DPU cut by 3-6% to factor in weaker RevPAR from Singapore and higher pre-opening expenses in Maldives.
  • Maintain ADD. Expect better 2H mainly due to the completion of Orchard Hotel renovation. CDL Hospitality Trusts is our preferred stock in the hospitality subsector.

Expect a weak 2QFY19F

  • Recall that CDL HOSPITALITY TRUSTS (SGX:J85)’s 1QFY19 Singapore revenue per available room (RevPAR) declined 2.4% y-o-y due to room closures in Orchard Hotel for renovation as well as the absence of the biennial Singapore Airshow and a series of events in conjunction with Singapore’s ASEAN Chairmanship in 2018.
  • We do not expect a strong RevPAR turnaround in 2QFY19F given Singapore's weak tourist arrivals. 56% of CDL Hospitality Trusts’s FY18 net property income (NPI) was derived from its Singapore hotel.
  • In addition, Orchard Hotel was still under renovation in 2QFY19 while Raffles Maldives likely incurred opening expenses as it ramped up its operation in phases in 2Q.
  • Continuous AU$, NZ$ and £ weakness during 2Q y-o-y would also drag on earnings.
  • CDL Hospitality Trusts was also negatively impacted by the Trump-Kim Summit in Singapore last year. The absence of such event this year should provide some relief.

Looking forward to a better 2H19F

  • Orchard full completion by 3QFY19. We expect this Singapore RevPAR. The hotel opening of some rooms would help to absorb some of the losses. Raffles Maldives’ land villas had a soft opening in 2Q19 while the over-water villas will open later this year.
  • The completion of the lobby of The Lowry Hotel in Manchester in May 2019, will also help to lift earnings.
  • Considering the above factors, we expect stronger 2H19F results as long as tourist arrivals to Singapore stay stable.

Maintain ADD on CDLHT

  • We trim Raffles Maldives.
  • We maintain our ADD call on CDL Hospitality Trusts. We believe the market has environment. Rerating catalysts include performance.
  • CDL Hospitality Trusts remains as our preferred stock in the hospitality subsector. It is the bellwether stock of the hospitality REIT in Singapore.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-07-24
SGX Stock Analyst Report ADD MAINTAIN ADD 1.92 DOWN 1.970