• 1Q15 DPU dipped 11.3% YoY
• Singapore RevPAR down 9.9%
• Four hotels to participate in SEA Games

1Q15 results below expectations

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. This was partly because distributable income does not include contribution from its Japan Hotels, which will only see distribution in 4Q15 after the financial results of its Japanese subsidiary are audited (fiscal year ending 30 Sep). Adjusting for this, DPU would have declined at a lower rate of 8% YoY.

June should see some uptick

CDLHT’s Singapore Hotels 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). The Singapore hospitality market was impacted by the absence of the biennial Singapore Airshow and sluggish corporate spending environment. According to CDLHT, RevPAR for the Singapore Hotels declined 10.1% YoY for the first 28 days of Apr. This reflects the continued macroeconomic vagaries and soft consumer sentiment.

While some recovery could happen in May, we believe it would be Jun before CDLHT sees a more significant uptick. Out of the 20 hotels officially selected to accommodate athletes and officials participating in the upcoming South-East Asian Games next month, four are owned by CDLHT. Namely, these are Copthorne King’s Hotel, Grand Copthorne Waterfront Hotel, M Hotel and Novotel Singapore Clarke Quay. Based on our understanding, take-up rates for these hotels would range from 40%-80% of capacity, with room rates at least similar to their corporate rates.

Maintain HOLD

As at end-1Q15, CDLHT’s gearing ratio stood at 32.3%. Following a refinancing exercise, 61% of its debt are fixed (as at 29 Apr 2015). We ease our DPU forecasts by 1.5% and 1.2% for FY15 and FY16, respectively. Consequently, our fair value estimate is lowered from S$1.76 to S$1.74. Maintain HOLD.

Source: OCBC Research - 4 May 2015