Towards Financial Freedom
CDL Hospitality Trusts - Diversification Pays Off
CDLHT's 4Q14/FY14 results were in line. DPU rose 7.2%/0.1% to 3.13/10.98 cents, with stronger contributions from Maldives last quarter. Reiterate NEUTRAL with an unchanged TP of SGD1.78 (CoE: 7.2%, TG: 1%), implying a 5.9% total return. The two new Japan hotels acquired in December should augment income stream in 1Q15. With unabatedheadwinds facing both the demand and supply side of the tourism industry, we see limited growth prospects in Singapore over the next two years.
Results in line; FY14 DPU flattish YoY. CDL Hospitality Trusts (CDLHT) posted a 7.2%/0.1%YoY rise in 4Q14/FY14 DPU to 3.13/10.98 cents, bolstered by its Maldives resort acquisitions, which contributed 18.8% to 4Q14 net property income (NPI). The Singapore hotels' revenue per available room (RevPAR) fell 1.6% YoY to SGD188 in FY14, as the corporate business continued to be affected by tight travel budgets as well as a drop in Chinese tourist arrivals following the "forced shopping" ban introduced by China in Oct 2013. The MH370 disappearance in March and the political instability in Thailand also further dragged down tourist arrivals, with Chinese tourist arrivals declining 25.7% YTD Nov 2014.
Tourism outlook unlikely to turn around in 1H15. For the first 26 days of January, RevPAR for Singapore hotels decreased by 6.3% compared to the same period last year, given the absence of biennial Singapore Airshow in February and Food and Hotel Asia in April. We remain wary of near-term tourism prospects, given that the SEA Games is starting only in June. On the supply front, hotel room inventory will continue to grow by an estimated 3,258 rooms in 2015 (2014: 1,789), increasing room stock by 5.7%. As such, room rates are likely to remain competitive, with hoteliers likely to lower room rates to maintain occupancy, as we witnessed last year.
Diversification is key. We expect the two new Japan hotels and Maldives assets to contribute ~2% and 10% respectively to FY15 NPI, which should help to buffer against the languish Singapore landscape. With unabated headwinds facing both the demand and supply side of the next two years, which highlights the urgency to diversify regionally. Until then, we maintain NEUTRAL with an unchanged TP of SGD1.78.
Source: OSK-DMG
Results in line; FY14 DPU flattish YoY. CDL Hospitality Trusts (CDLHT) posted a 7.2%/0.1%YoY rise in 4Q14/FY14 DPU to 3.13/10.98 cents, bolstered by its Maldives resort acquisitions, which contributed 18.8% to 4Q14 net property income (NPI). The Singapore hotels' revenue per available room (RevPAR) fell 1.6% YoY to SGD188 in FY14, as the corporate business continued to be affected by tight travel budgets as well as a drop in Chinese tourist arrivals following the "forced shopping" ban introduced by China in Oct 2013. The MH370 disappearance in March and the political instability in Thailand also further dragged down tourist arrivals, with Chinese tourist arrivals declining 25.7% YTD Nov 2014.
Tourism outlook unlikely to turn around in 1H15. For the first 26 days of January, RevPAR for Singapore hotels decreased by 6.3% compared to the same period last year, given the absence of biennial Singapore Airshow in February and Food and Hotel Asia in April. We remain wary of near-term tourism prospects, given that the SEA Games is starting only in June. On the supply front, hotel room inventory will continue to grow by an estimated 3,258 rooms in 2015 (2014: 1,789), increasing room stock by 5.7%. As such, room rates are likely to remain competitive, with hoteliers likely to lower room rates to maintain occupancy, as we witnessed last year.
Diversification is key. We expect the two new Japan hotels and Maldives assets to contribute ~2% and 10% respectively to FY15 NPI, which should help to buffer against the languish Singapore landscape. With unabated headwinds facing both the demand and supply side of the next two years, which highlights the urgency to diversify regionally. Until then, we maintain NEUTRAL with an unchanged TP of SGD1.78.
Source: OSK-DMG
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