• 2Q15 DPU slumped 10.0% YoY
• Singapore RevPAR down 4.4%
• Outlook still subdued

2Q15 results fell short of expectations

CDL Hospitality Trusts (CDLHT) reported its 2Q15 results which came in below our expectations. Although gross revenue rose 3.0% YoY to S$39.0m, it was a decline of 7.6% on a QoQ basis. The YoY improvement was largely attributable to additional contribution from two Japan hotels acquired in Dec 2014, but partially offset by weakness in Singapore, Australia and New Zealand. DPU fared worse, declining 10% YoY and 7.8% QoQ to 2.25 S cents.

For 1H15, CDLHT’s gross revenue slipped marginally by 0.5% to S$81.2m and contributed 46.1% of our FY15 forecast. DPU dipped 10.8% to 4.69 S cents and this made up 43.0% of our full-year projection. If we include the distributable income from its Japan hotels, which is only available for distribution in 4Q15 once the financial results for the first fiscal year ending 30 Sep are audited, CDLHT’s 1H15 DPU would instead have declined by 7%-8%.

RevPARs remain sluggish

CDLHT’s performance was impacted by a weak tourism scene and sluggish corporate demand. Despite a stable occupancy rate of 86.5% (+0.4 ppt), its Singapore hotels’ RevPAR dipped 4.4% YoY to S$173 due to a fall in average daily rate by 5.2% to S$200. For 1H15, RevPAR for Singapore was down 7.5% to S$173.

While the SEA Games provided an uplift in occupancy and rates over the two week period in Jun, this was partially offset by the absence of the biennale Food and Hotel Asia event in Apr this year. We understand that demand for rooms fell short of management’s expectations after the SEA Games. For the first 27 days of Jul, RevPARs for CDLHT’s Singapore hotels dropped 4.2% YoY.

Pare forecasts, FV and maintain HOLD

Given this lacklustre set of results and ongoing industry headwinds, we cut our DPU forecasts by 7.5% and 6.9% for FY15 and FY16, respectively. Consequently, our fair value estimate is lowered from S$1.74 to S$1.61. As CDLHT’s share price has fallen 6.3% YTD, we believe the market has largely priced in its negatives. Hence, we maintain HOLD on valuation grounds.

Source: OCBC Research - 30 Jul 2015