CDL Hospitality Trusts - CGS-CIMB Research 2019-07-30: Looking Forward To A Better 2H


CDL Hospitality Trusts - Looking Forward To A Better 2H

  • CDL HOSPITALITY TRUSTS (SGX:J85)'s 1H19 DPU of 4.16 Scts came in at 47% of our full year forecast. We deem this to be in line.
  • Singapore performance continued to be weak, while overseas showed mixed performances.
  • Maintain ADD on CDL Hospitality Trusts with an unchanged Target Price of S$1.92. We expect a stronger 2H due to the completion of renovation for Orchard Hotel.

1HFY19 results highlights

  • CDL HOSPITALITY TRUSTS (SGX:J85)'s 1H19 DPU of 4.16 Scts (-3.5% y-o-y) formed 47% of our FY19F. We deem this to be in line as we expect 2H2019 to be stronger on the completion of the renovation in Orchard Hotel and the gradual reopening of Raffles Maldives.
  • 1H2019 revenue declined 5.8% y-o-y to S$93.8m mainly attributed to the closure of Raffles Maldives Meradhoo since Jun last year. In addition, its Singapore, New Zealand, Australia and UK hotels’ performances were also weaker. The decline was partially mitigated by the acquisition impact from the Italy hotel and higher contribution from Pullman Hotel Munich and the Japan hotels.

Singapore market continued to be weak

  • Singapore hotel’s occupancy rose 0.2% pts y-o-y to 85.7% but average room rate declined 2.3% y-o-y to S$179, translating to a 1H2019 RevPAR of -2.1% to S$154. Trade tensions and regional elections, coupled with the absence of the biennial Singapore Airshow, ASEAN Ministerial Meeting series and Food&HotelAsia resulted in reduced compression and few opportunities to yield room rates.
  • Additionally, several hotels also undertook guest room refurbishment and pipe works, closure of guestrooms and displacement of rooms. We understand that Jul performance was decent.

Mixed performances from overseas

  • While Raffles Maldives was affected by a rebranding exercise, Angsana Velavaru reported a +16.5% RevPAR in 1H19 as it adopted a volume-centric strategy. Its Australia and New Zealand markets reported weaker performance, affected by a weaker A$ and price competition respectively. Japan’s RevPAR rose 3% y-o-y, aided by the reduction in Airbnb supply from Jun 2018.
  • In the UK, performance was boosted by The Lowry Hotel due to good demand generated by sporting and entertainment events. Munich Pullman Hotel continued to perform well, thanks to the strong city-wide events calendar this year. Hotel Cerrentani Florence’s RevPAR was +10.9% y-o-y due to good occupancy.

Maintain ADD

  • We maintain our FY19-21F DPU forecasts and DDM-based Target Price of S$1.92. We maintain ADD on CDL Hospitality Trusts as we think the weak performance has been priced-in.
  • We continue to expect CDL Hospitality Trusts to show a stronger 2H19 due to the completion of Orchard Hotel.
  • Further re-rating catalysts include higher-than-expected capital distributions and accretive acquisitions.
  • Downside risks include weaker-than-expected sector recovery.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | 2019-07-30
SGX Stock Analyst Report ADD MAINTAIN ADD 1.920 SAME 1.920