• CDL Hospitality Trusts' 2Q18 DPU of 2.14 Scts came in slightly below at 22% of our full-year forecast. 1H formed 44% of our full-year forecast.
• Performance was affected by Singapore, Maldives, Australia, New Zealand and UK.
• Trim earnings, factoring in the effect of refurbishments and weaker Singapore Revpar.
• We expect a stronger performance next year as 2HFY18 will be a transition period.
• Maintain ADD. CDLHT remains a proxy for a recovery in the Singapore hospitality market.

2Q18 Results Highlights

CDL Hospitality Trusts' 2Q18 net property income (NPI) declined 3.7% y-o-y. DPU, however, increased 2.9% y-o-y as a result of the partial distribution of proceeds from the divestment of Mercure Brisbane and Ibis Brisbane. Weaker NPI was dragged down by Singapore (-2.2% y-o-y), Maldives (- 54.8% y-o-y), Australia (-32% y-o-y), New Zealand (-20% y-o-y) and UK (-59.5% y-o-y). 

Singapore operations reported a decline of 2.2% in NPI on the back of weaker Revpar (- 0.9% y-o-y) due to

1. 2 public holidays in May which fell midweek and
2. Trump-Kim summit in Jun which caused low overall occupancy rate of 60-70% for about seven days.

Excluding this, RevPAR would have been in the positive low-single digits.

The Overseas Markets

Weaker RevPAR from the Maldives was due to weak demand and closure of Dhevanafushi Maldives Luxury Resort (DMLR) from 1 Jun to rebrand the business. Australia declined due to the divestment of Mercure Brisbane and Ibis Brisbane in Jan 17. 

New Zealand was weaker due to the absence of sporting events which was present in 2Q17, weaker NZD and higher property tax, while the UK was affected by higher hotel supply. 

Although Japan reported positive NPI, Revpar declined 2.2% y-o-y due to competition. The new regulations imposed on Airbnb Japan which require hosts to obtain government permits resulted in a significant number of Airbnb listings in Tokyo being temporarily suspended in Jun. This should provide some relief in the short term.

Source: CGS-CIMB Research - 27 Jul 2018