• NZ Hotel: Major growth driver
• SG: ~2.8k rooms to open in 2Q
• FV increases to S$1.49

1Q17 DPU Increases 9.0% YoY

CDL Hospitality Trusts (CDLHT) posted results that were within expectation. 1Q17 revenue increased 3.9% YoY to S$46.4m, or 26.2% of our full-year forecast. 1Q17 NPI increased 6.4% to S$35.9m or 25.7% of our full-year forecast, contributed by a 90% YoY growth in NPI from the New Zealand (NZ) Hotel.

This NPI growth was partially offset by lower contributions from the Japan Hotels and the Maldives Resorts in addition to a decline in variable rent from the Australian Hotels. While the United Kingdom Hotel clocked a 17.9% YoY increase in RevPAR in GBP terms, its contribution in SGD recorded a marginal decline due to negative currency translation. DPU after retention increased 9.0% YoY to 2.42 S cents, or 24.8% of our full-year forecast.

Challenges Remain in SG…

We note that CDLHT's Singapore Hotels posted a fairly resilient performance with a 0.8% YoY drop in 1Q17 RevPAR. This relatively mild decline was achieved despite the absence of the biennial Singapore Airshow. Nonetheless, we expect the operating environment to remain challenging going forward given the weak corporate environment and incoming hotel supply – 130 rooms were added in 1Q17, while 2,826 more are expected in 2Q17.

We stick to our general expectation of mid-single digit to low doubledigit RevPAR declines for the remaining quarters. Notably, Claymore Connect continues to do well, with a 17% YoY increase in 1Q17 revenue, after a 39% YoY jump in FY16 revenue.

All Eyes on New Zealand

CDLHT’s Grand Millennium Auckland clocked a very impressive 27.6% YoY growth in 1Q17 RevPAR (NZD terms), and we expect this momentum to continue for the next few quarters. Looking ahead, RevPAR declines in Maldives are forecasted to moderate while 2Q trading conditions in Japan look to be soft given the yen strength appreciation against other Asian currencies in the past year.

After adjustments, our fair value increases slightly from S$1.46 to S$1.49. As of yesterday’s price, CDLHT is trading at a FY17 dividend yield of 6.6% and looks reasonable against our fair value. We maintain HOLD on CDLHT with fair value of S$1.49.

Source: OCBC Research - 27 Apr 2017