SINGAPORE (May 2): CGS-CIMB, RHB and UOB are maintaining CDL Hospitality Trusts at “add” after its results came in line with expectations.
Both 1Q18 gross revenue and NPI saw respective increases of 11.6% and 5.4% y-o-y, due to inorganic contribution from The Lowry Hotel in Manchester, UK, and Pullman Hotel Munich in Germany.
However, this was partially offset by softer trading performance from Japan, Maldives and Hilton Cambridge properties. Additionally, fixed rental income was lower from the Australian portfolio due to the divestment of Mercure and Ibis Brisbane in January.
CDL-HT’s Singapore hotel RevPAR rose y-o-y for a second straight quarter, reaffirming that trading conditions in the hotel market have been improving from the start of the year.
Management also noticed a pickup in corporate demand, which had been weak during the last few years.
Asset Enhancement Initiatives’ are planned at two of its Singapore hotels in 2H, to better tap into the expected hospitality recovery.
See: CDL Hospitality Trusts' 1Q DPS rises 7.4% to 2.17 cents on improved portfolio performance
CGS-CIMB says CDL-HT’s 1Q18 DPU of 2.17 cents was in line its and consensus expectations at 22% of the research houses’ full-year forecast.
Analyst Yeo Zhi Bin observes that CDL-HT has, for the third straight quarter, pushed rates up in view of its relatively high occupancy. Accordingly, average room rates (ARR) increased 1.7% y-o-y while occupancy inched down 0.8 percentage points.
In Singapore, the group will renovate guestrooms in Orchard Hotel in 2H18. A phased room refurbishment exercise is also planned for Grand Copthorne Waterfront Hotel in 2H18.
In Maldives, the Dhevanafushi resort will be fully closed from Jun 2018 with a planned reopening in 4Q18 under the “Raffles” brand.
Refurbishment is also planned for 28 land villas for Angsana Velavaru in 2018.
“Maintain Add with CDL-HT a proxy for the recovering Singapore market,” says Yeo.
Despite recent overseas acquisitions, RHB says CDL-HT remains one of the most liquid proxies to the recovery in Singapore’s hospitality market.
Despite a huge influx of hotel supply in 4Q17, domestic demand had remained fairly strong in 1Q18, which helped CDL-HT in increasing hotel rates.
Looking ahead, CIMB says management remains optimistic that the Singapore hotel sector has turned the corner and expects rates to move up once occupancy improves by a few percentage points.
In the overseas market, its performance in New Zealand is expected to moderate after a stellar 2017, while the Maldives operations have been dragged down by weak demand and political crisis.
The F&B segment’s performance also rose strongly in tandem with the increase in demand.
UOB KayHian says CDL-HT’s results were in line with expectations.
Despite strong materialisation of 4Q17 supply, CDL-HT’s Singapore properties also ontinued to perform moderately well.
Even with the supply surge registered in 4Q17, CDL-HT’s Singapore properties performed modestly well with RevPAR improving to $161 -- up 0.8% y-o-y -- partially supported by the biennial Singapore Air show which took place in Feb 18.
“We foresee a buoyant outlook for Singapore hotels on the back of favourable demand-supply dynamics going forward,” says analyst Vikrant Pandey.
Outlook for overseas market appears less upbeat though, as CDL-HT hotels in Japan and New Zealand grapple with more supply and increased competition.
CGS-CIMB has a target price of $1.92 while RHB and UOB KayHian have a target price of $1.95.
As at 3.44pm, units in CDL-HT were down 2 cents at $1.76 implying a yield of 5.4% based on UOB's FY18 DPU forecast.
