CDL Hospitality Trusts - 9M15 below: SG RevPARs fall 5.7% YoY but improve +4.6% QoQ


CDLHT's 9M15 DPU of S¢7.05 (-10% YoY) was below expectations at 66-67% of street and CS estimates. 9M15 NPI was down 2.6% mainly due to the lower contribution from SG, and Australia/NZ.

In 3Q15, the SG portfolio RevPARs were down 5.7% YoY to S$181 but managed to see an improvement of +4.6% QoQ, likely lifted by strong tourist arrivals in Jul and Aug (+7% YoY). 9M15 RevPARs are still lower by -6.4% YoY.

Maldives RevPARs weakened further in the quarter by -18.3% YoY (2Q15: -15.4% YoY) mainly due to the continued slowdown in Chinese travellers. AU NPI contribution fell 12.9% mainly from weakness in the AUD, and was also impacted by the slowing economy.

Maintain NEUTRAL on CDLHT as we believe there is no rush to re-enter at this juncture given supply headwinds and competition in Singapore will likely put pressure on RevPARs (CDLHT is ~70% Singapore).

CDLHT's 9M15 DPU of S¢7.05 (-10% YoY) was below expectations at 67% of street and CS estimates.

Whilst 4Q15 should benefit slightly from:
(1) maiden contribution from the UK;

(2) variable income received from Angsana Velavaru;

(3) contribution from JP being distributed, overall, 9M15 performance was impacted by lower contribution from SG (9M15 RevPAR declined by -6.4% YoY), and Australia/NZ (AUD and NZD weakness).

This was partially offset by maiden contribution from JP (acquired in Dec 2014) and higher contribution from Maldives, up 1.7% YoY, due to USD strengthening (note: only fixed income from Angsana Velavaru as variable rent of will only be recognised in 4Q15). Finance cost rose 23% with higher debt for JP, Claymore connect and higher US and SG debt cost.

3Q15 SG portfolio RevPARs down 5.7% YoY to S$181 but managed to see an improvement of +4.6% QoQ, likely lifted by strong tourist arrivals in Jul and Aug (+7% YoY). Occupancy remained high at 90.2% (+3.7 pp QoQ), whilst average room rates (ARR) were stable at S$201 QoQ. According to STB, RevPARs for Jul and Aug were weaker by -4.5% YoY and -2.7% YoY, respectively, as hotel room supply is expected to rise by 4,361 rooms (+7.6%) in 2015, which will likely to still place pressure on ARRs.

3Q15 AU NPI contribution fell -12.9% YoY (1H15 NPI -8.1% YoY) mainly due to weakness in the AUD. Performance was still impacted by the slowing economy but downside risk is mitigated by the defensive lease structure (fixed rent ~80% of total revenue).

Maldives saw 3Q15 RevPARs drop 18.3% YoY (2Q15: -15.4% YoY) due to a slowdown in Chinese luxury travel and continued strengthening of the USD (rooms priced in USD). Weaker operations were mitigated by FX gains from the stronger USD, as well as minimum rents from Angsana Velavaru.

Strong JP RevPAR growth of 20.9% YoY (2Q15: 29.1% YoY) (Yen basis) supported by a 48.8% YoY growth in visitors due to weak yen and visa waivers. However, JP only accounts for ~4% of NPI, and corresponding cash contribution will only be distributed in 4Q15.

Balance sheet still healthy. CDLHT's gearing rose 4pp QoQ to 36% following the acquisition of Cambridge Hotel, UK (link to report here) with 60% of borrowings fixed. Average debt cost edged 0.1pp lower to 2.6%. However, S$246 mn of debt (38% AUD, 62% SGD), 26% of total debt, is due to expire in 2015, and management has previously guided that interest cost will creep higher post refinancing.

AEIs: (1) M-Hotel will refurbish 288 of its 413 rooms and is targeted to complete in April 2016; (2) Grand Copthorne Waterfront will also refurbish its lobby, create a new integrated F&B and enhance/expand meeting rooms and facilities. This is planned to begin in Nov 2015 and complete around mid-2016.

Technical Analysis
Daily Chart
Maintain NEUTRAL on CDLHT as we believe there is no rush to reenter at this juncture given supply headwinds and competition in Singapore will likely put pressure on RevPARs. (Read Report)

Read Related Reports
1) CDL Hospitality Trusts - Challenging Environment For Singapore Hoteliers by RHB Research, published on 30 October 2015

2) CDL Hospitality Trust - Mixed results by CIMB Research, published on 29 October 2015

3) CDL Hospitality Trusts - On the cusp of a turnaround? by Daiwa Capital Markets, published on 29 October 2015

Source : Credit Suisse Asia Pacific Equity Research

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