CDL Hospitality Trusts - OCBC Investment 2019-07-31: A Promising Start To 3Q? 


CDL Hospitality Trusts - A Promising Start To 3Q? 

DPU drops 3.3% y-o-y in 2Q19; helped by higher capital distributions

  • CDL HOSPITALITY TRUSTS (SGX:J85) posted results that were slightly below expectation.
  • 2Q19 revenue dropped 0.5% y-o-y to S$47.5m. On the back of flat NPI and higher finance expenses, 2Q19 distributable income (after retention) dropped 7.1% y-o-y to S$21.0m. However, due to higher capital distribution (S$4.1m in 2Q19 vs. S$3.2m in 2Q18), total distributable amount dropped by a milder 2.6% y-o-y to S$25.1m. As a result, 2Q19 DPU dropped 3.3% y-o-y to 2.07 S cents or 23.2% of our initial full-year forecast.
  • We consider this only slightly below expectations, as we expect CDL Hospitality Trusts’ results to be stronger in 2H with the seasonally strong 4Q, the completion of the rejuvenation of Orchard Hotel, and the opening of Raffles Maldives Meradhoo.

Excluding out-of-order inventory, SG RevPAR up 1.3% in 2Q19

  • During the quarter, Singapore RevPAR dropped 1.7% y-o-y, on soft overall demand and the absence of Food&HotelAsia. In addition, room refurbishment at Orchard Hotel and pipeworks at M Hotel and Copthorne King’s resulted in room displacement. Excluding out-of-order rooms, CDL Hospitality Trusts’ SG RevPAR increased 1.3% y-o-y.

SG RevPAR up 4.1% for first 28 days of Jul

  • Looking ahead, the REIT manager disclosed that CDL Hospitality Trusts’s SG RevPAR grew 4.1% y-o-y for the first 28 days of Jul 2019, which we find a promising start to 3Q. In addition, with the Orchard Hotel rejuvenation complete, we expect the performance of the SG portfolio to improve in the coming quarters.
  • As for Dhevanafushi Maldives Luxury Resort, the land villas were completed in May while the over-water villas will complete later in the year whereby the full opening of the resort will occur. While we look forward to its contributions as a rebranded property, we do note that the asset will take time to stabilize.
  • After adjustments and decreasing our risk-free rate from 2.3% to 2.0%, our fair value increases from S$1.54 to S$1.56.
  • While we see more to look forward to operationally in 2H19, we do not find valuations compelling as at 30 Jul’s close.
  • CDL Hospitality Trusts is currently trading with a 5.3% FY19F dividend yield. We maintain HOLD on CDL Hospitality Trusts.

Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2019-07-31
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.56 UP 1.540