• 1Q14 DPU up 2.2% YoY
• Maldives resorts key growth driver
• Competitive landscape to persist

1Q14 results exceeded expectations

CDL Hospitality Trusts (CDLHT) reported 1Q14 gross revenue of S$43.8m, up 15.3% YoY, due to higher contribution from its Maldives resorts and stable performance from its Singapore hotels. NPI rose at a slower pace of 4.1% to S$36.7m, dragged down by higher operating expenses with the inclusion of Jumeirah Dhevanafushi into CDLHT’s portfolio. Consequently, distributable income increased 3.0% to S$29.9m, while DPU grew 2.2% to 2.75 S cents. Nevertheless, the results were ahead of expectations, as the quarterly distribution made up 26.5% of our FY14 DPU projection.

RevPAR growth for Maldives and Singapore assets

Jumeirah Dhevanafushi made its maiden revenue contribution of S$6.9m, whereas Angsana Velavaru added S$0.7m (+54.1% YoY) to rental revenue. As a whole, the two Maldives resorts registered a RevPAR growth of 10.4% YoY. For the Singapore hotels, RevPAR also improved 0.5% to S$192 on the back of a 1.2ppt increase in occupancy to 88.2% and return of the biennial Singapore Airshow in Feb. This helped to offset the loss of income from the closure of Claymore Link for refurbishment. However, we note that the operating environment in Singapore remains competitive amid a restrained corporate travel budget and larger supply of new hotel rooms, as evidenced by a slight 0.5% decline in average daily rate.

Australia hotels hit by weaker AUD and variable income

The Australian hotels saw reduced contribution of S$5.0m in 1Q, down 21.4% YoY. This was attributable to a depreciating AUD and lower full-year variable income of S$1.1m (1Q13: S$2.0m) as a result of softer showing in 2013 and partial closure of Mercure Brisbane. Management cautioned the slower Australian economy and lower activity in the mining sector may lead to continued weakness.

Maintain HOLD

Looking ahead, CDLHT expects the ~2,500 new rooms supply to perpetuate the competitive environment in Singapore. For the first 23 days of Apr, we understand that RevPAR for its Singapore hotels eased 1.2%. However, as we factor in the better results, our fair value is now raised to S$1.80 from S$1.65. Maintain HOLD.

Source: OCBC Research - 28 Apr 2014