CDL Hospitality Trusts

Kim Eng on 31 Jan 2013

4Q/FY12 earnings inline. FY12 revenue at SGD149.5m (+6%) was 99% of ours and 100% of consensus estimate. 4QFY12 revenue at SGD38.3m (+6% QoQ, +1% YoY) was 25% of ours and 26% of consensus estimate. FY12 DPU at 11.32 SG-cts (+2%) was 99% of ours and 101% of consensus estimates. 4QFY12 DPU at 2.90 SG-cts (+7% QoQ, -1% YoY) was 25% of ours and 26% of consensus estimates. Aggregate leverage inched down to 24.9% from 25.5% last quarter, partly following revaluation gains (Post Maldives acquisition gearing ~27.9%), Average term of debt was also lengthened to 1.8 years (3Q: 1.6 years).

Portfolio review. Singapore 4Q12 hotel occupancy (excl. Studio M Hotel) at 89.4% was up 0.8ppt QoQ and YoY. Average Room Rate (ARR) at SGD229 was down 3% QoQ and 1.3% YoY. The corporate market, in particular, the meetings and conference business, was affected by the economic malaise, leading to the relatively flat performance. Many companies globally, as well as leisure travellers, continue to exercise caution in travel expenditure which will continue to weigh on the attendant accommodation demand in FY13. For FY12, average occupancy rate climbed 1.1 ppt to 89% and ARR increased 2.2% to SGD237. Orchard Hotel, however, suffered a 6% and 9% YoY drop in FY12 revenue and NPI respectively. Management attributed this partly to the loss of weekend crowd to the Marina Hotels. It also guided that 1Q13 performance for Singapore Hotels will be negatively affected by the absence of the biannual Singapore Airshow as well the CNY falling later this year. The corporate travel momentum, which usually picks up in Feb after the holiday season, may be disrupted due to CNY falling in Feb this year as compared to Jan last year.

Expect slower tourism growth amidst a more competitive landscape. CDLHT derived ~81% of revenue from Singapore. We remain cautious of the impending supply of 11,370 hotel rooms (incl. those under construction and with WP/PP; ~26% of gazette stock) in 2013-2016, of which 3,766 rooms will complete in 2013 (~9% of gazette stock). We expect CDLHT’s SG hotel occupancy (excl. Studio M Hotel) to drop to 87% in 2013 and RevPAR to fall to SGD208 from SGD211 last year. We keep our visitor arrivals forecast intact with 14.2m and 16.2m arrivals in 2012 and 2015 respectively.

Maldives acquisition to complete soon. There was a one week delay in getting the Maldives’ Ministry of Tourism approval for the acquisition of Angsana Velavaru. Nonetheless, CDLHT expects the acquisition to complete in the next few days. With its relatively low gearing, management continues to source for acquisitions in attractive overseas markets such as Japan and Dubai. Reiterate HOLD with TP of SGD1.98.