CDL Hospitality Trusts - OCBC Investment 2019-10-31: A Better Quarter


CDL Hospitality Trusts - A Better Quarter

  • Recovery in Singapore market.
  • Maldives remained a drag.
  • Higher Fair Value estimate of S$1.69.

Stronger performance in Singapore

  • CDL HOSPITALITY TRUSTS (SGX:J85)’s 3Q19 revenue fell 1.8% y-o-y to S$49.1m while NPI fell 1.5% to S$35.7m due largely to lower contribution from overseas markets. See CDL Hospitality Trust Announcements.
  • DPU dropped 4.1% y-o-y to 2.09 S cents in 3Q19. As such, 3Q19 DPU and 9M19 DPU come up to 24%/ 71% of our initial full-year forecasts. See CDL Hospitality Trust Dividend History.
  • Singapore RevPAR rose 4.9% y-o-y in 3Q19, on the back of a 4.3% improvement in ADR and 0.6pp increase in occupancy. This growth was mainly driven by stronger leisure travel market, additional business generated by the F1 Singapore Grand Prix, and also potential diversion of tourism flows to Singapore due to the unrest in Hong Kong.

Overseas markets was a drag

  • NPI performance of CDL Hospitality Trusts’s overseas market fell between 5.9-40.1% y-o-y in terms of NPI, led by New Zealand (-19.5% y-o-y, due to weaker currency and intensified competition), Germany (-19.9% due to fewer events in 2H) and Japan (-40.1% down, impacted by Japan-Korea trade dispute and competition).
  • The 2 resorts in Maldives remains a drag. Angsana Velavaru’s performance was affected by competition and renovation works while Raffles Maldives Meradhoo soft opened in Sep 2019 but is expected to take a few years before reaching a normalized occupancy level.

Expect stronger 2020

  • CDL Hospitality Trusts will continue to look out for acquisitions, potentially in Singapore and Europe, with Singapore as their preferred market due to benign pipeline of supply (at low CAGR of 1.3% for the next 4 years) and favourable marco environment in Singapore.
  • 9M19 RevPAR for Singapore hotels rose 0.4% y-o-y and RevPAR for the first 27 days of Oct was +0.2% y-o-y. Management expects positive RevPAR growth in 2H and a 2-3% RevPAR growth in 2020.
  • Looking ahead, we are expecting a stronger 2020, driven by biennial events in Singapore and Olympics and Paralympics in Japan. We increase our FY19 and FY20 NPI forecast by 1% and 6% each. As such, our fair value estimate increases from S$1.56 to S$1.69. See CDL Hospitality Trust Share Price; CDL Hospitality Trust Target Price.
  • See also recent SGX Market Update: SIA, ComfortDelGro, CDL Hospitality Joined FTSE Value-Stocks ASEAN Index.

Chu Peng OCBC Investment Research | 2019-10-31
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.69 UP 1.560