Tuesday 29 July 2014

CDL Hospitality Trusts

Kim Eng on 29 Jul 2014

  • 2Q14 results dented by weaker tourist arrivals and seasonally weaker contribution from its Maldives resorts.
  • CDLHT remains positive on 2H14 tourism outlook and is seeing signs of an uptick in recent months.
  • TP remained unchanged at SGD1.93; reiterate BUY.
2Q14 results weaker but in line
CDLHT posted a 6.4%/11% YoY rise in 2Q14/1H14 revenue to SGD 37.9m/81.6m, bolstered by its Maldives resort acquisitions.  2Q14/1H14 DPU, however, fell 8.1%/3% YoY to 2.50/5.25 SGD cts
partly due weaker tourist arrivals into Singapore, the on-going refurbishments at Claymore Link and weaker performance at Jumeirah Dhevanafushi resort in Maldives. Management clarified that 2Q/3Q are seasonally the weakest quarters for Jumeirah. More than 70% of the revenue contribution typically comes through in 1Q/4Q with the arrival of higher-yielding tourists from China, Europe and Russia. The Singapore hotels RevPAR also fell by 6.2%YoY to SGD181, dragged down by tight business travel budgets and a 27.4% YoY fall in YTD Chinese tourist arrivals following the ‘forced shopping’ ban introduced by China last October.

2H14 tourism outlook remains positive
Despite the weaker 2Q14, CDLHT sees some signs of improvement in 3Q14. For one, the Singapore Tourism Board and Changi Airport Group launched a SGD1m drive to attract Chinese visitors and promote the city-state as a standalone tourism destination. With only 926 hotel room additions in 2H14 (2013: 3,340), CDLHT expects some respite for hoteliers. The newly-opened Singapore Sports Hub – hosting 10 international sporting events this year such as the new Women's Tennis Association Championships in October -is also expected to be a tourism boost in 2H14. Reiterate BUY with an unchanged DDM-derived TP of SGD1.93 (cost of equity = 6.7%; Tg = 1%).

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