CDL Hospitality Trusts (CDLHT) reported its 1Q15 results, with DPU missing our expectations. Gross revenue slipped 3.5% YoY to S$42.2m, attributed to weaker performance from its Singapore hotels (-13%), but partially mitigated by contribution from two new Japan hotels acquired in Dec 2014. This formed 24.0% of our full-year forecast. DPU fared worse, dipping 11.3% YoY to 2.44 S cents, and this constituted 22.1% of our FY15 projection.

Overall portfolio RevPAR fell 9.9% YoY to S$173, as average daily rate slumped 9.6% to S$197 while occupancy rate was largely stable at 87.7% (-0.5 ppt). Looking ahead, CDLHT believes it has ample debt headroom (gearing ratio 32.3% as at 31 Mar 2015) to continue sourcing for suitable acquisition opportunities to fuel its inorganic growth. We will provide more details after speaking with CDLHT. We maintain our HOLD rating but will likely pare our S$1.76 fair value estimate on the stock.

Source: OCBC Research - 30 Apr 2015