• SG RevPAR mildly positive
• 5.5% FY18F yield as of 30 Apr
• FV remains at S$1.60

1Q Results Below Expectations

CDL Hospitality Trusts’ (CDLHT) results were below expectations. 1Q revenue increased 11.6% YoY to S$51.8m while NPI increased 5.4% to S$37.8m. 1Q18 DPU came to 2.17 S cents, which made up 22% of our initial full-year forecast. This figure was 7.4% higher than the 1Q17 DPU of 2.02 S cents (restated to reflect rights issue) but 10.3% lower than the reported 1Q17 DPU of 2.42 S cents. 1Q DPU also made up ~22% of full-year DPU in both FY17 and FY16, but we note that this was skewed by substantial acquisitions made in 2H17 and the change in NZ rental structure in 2H16.

SG RevPAR Increased 0.8% YoY in 1Q18

Singapore RevPAR increased 0.8% YoY to S$161 on a 1.7% YoY increase in ARR which offset the 0.8 ppt decline in occupancy. RevPAR growth in local currency for overseas markets was +4.6% for New Zealand due to the high base effect, - 18.8% for Maldives due to an increasing hotel room supply and political situation, -8.9% for Japan due to rate pressure, -6.5% for the UK’s Hilton Cambridge City Centre due to inclement weather, +6.8% for the UK’s The Lowry Hotel on the back of a healthy entertainment sector, and - 7.6% for Germany due to extreme temperatures and the absence of a major event.

Growth for SG Hotels Expected to Accelerate Going Forward

After adjustments, our fair value remains at S$1.60. Going ahead, we believe the growth of CDLHT’s SG hotels will accelerate given that last year’s supply injection was backend-loaded. We expect lower contributions from Australia as Mercure Brisbane and Ibis Brisbane were divested on 11 Jan 2018, while New Zealand RevPAR growth is likely to moderate going forward.

We now assume S$5m of capital distributions in FY18F (~0.42 S cents per unit), to smoothen out the loss in income from the Brisbane divestment as well as from the rebranding at Maldives. While we still see operational upside from CDLHT’s SG portfolio, we do not find valuations as of 30 Apr attractive. CDLHT is trading at a 5.5% FY18F and a 5.6% FY19F yield as of the closing price on 30 Apr. We maintain HOLD on CDLHT.

Source: OCBC Research - 2 May 2018