Wednesday 31 October 2012

CDL Hospitality Trusts

OCBC on 30 Oct 2012

CDL Hospitality Trusts (CDLHT) reported 3Q12 gross revenue of S$36.1m, down 0.8% YoY. Net property income contracted 1.1% YoY to S$33.6m. CDLHT’s Singapore hotels saw a slowdown due to the weak global economic environment and the fixed rent contribution from the Australia hotels was slightly lower YoY due to translation loss arising from the weakening AUD. 3Q12 RevPAR for the Singapore hotels declined 0.9% YoY to S$209. 9M12 income available for distribution per stapled security, after deducting income retained for working capital, is 8.42 S cents, 71% of our prior FY12 estimate of 11.9 S cents, which we will have now lowered to 11.3 S cents since we expect 4Q12 to be weak too. A major local hotelier we spoke to is also viewing early 2013 demand with caution. While we had expected 3Q12 to be poor for the hospitality sector, the results are below our expectations. We maintain a HOLD rating on CDLHT and adjusting our model, we reduce our fair value from S$2.06 to S$1.91.

3Q12 weakness for SG hotels
CDL Hospitality Trusts (CDLHT) reported 3Q12 gross revenue of S$36.1m, down 0.8% YoY. Net property income contracted 1.1% YoY to S$33.6m. CDLHT’s Singapore hotels saw a slowdown due to the weak global economic environment and the fixed rent contribution from the Australia hotels was slightly lower YoY due to translation loss arising from the weakening AUD. Income available for distribution per stapled security, after deducting income retained for working capital, declined by 1.8% YoY to 2.72 S cents. 3Q12 average room rates for the Singapore hotels stayed flat at S$236 but occupancy fell from 89.5% in 3Q11 to 88.6%. RevPAR declined 0.9% YoY to S$209. 

9M12 misses expectations
9M12 income available for distribution per stapled security, after deducting income retained for working capital, is 8.42 S cents, 71% of our prior FY12 estimate of 11.9 S cents, which we will have now lowered to 11.3 S cents as we expect 4Q12 to be weak too. 9M12 gross revenue of S$111.2m was up 7.6% YoY, underpinned by a 4.5% YoY growth in RevPAR to S$213. CDLHT has a healthy gearing of 25.5% and says it continues to source for acquisition opportunities in the next 12 months.

Challenges for the industry
According to CDLHT, the first 24 days of Oct showed an indicative RevPAR growth of 1% YoY for the Singapore hotels. We recently spoke to a hospitality industry contact and understand that hotel room bookings have been quite lumpy for 4Q12, with pockets of days with less occupancy. Given that many MICE events are held one every two years, specifically with more being held in even-numbered years, 2012 could provide a challenging comparison for 2013. A major local hotelier we spoke to is also viewing early 2013 demand with caution. 

Lower FV to S$1.91; maintain HOLD
We have adjusted assumptions in our RNAV model, rolling it forward to FY13. We lower our fair value from S$2.06 to S$1.91 and maintain a HOLD rating on CDLHT.

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