30 October 2014
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No Signs Of Recovery YTD

CDL Hospitality Trusts’ 3Q14/9M14 DPU dropped 1.1%/2.4% to 2.61/7.86 cents respectively. We assume coverage with a NEUTRAL and DDMderived SGD1.76 TP (from SGD1.63), a 3.5% upside from its current share price. With headwinds facing both the demand and supply side of the tourism industry not abating, we see limited growth prospects over the next two years for this stock.

  • Results in line, 9M14’s distribution per unit (DPU) at 73% of our forecast. CDL Hospitality Trusts posted 11.9%/11.3% YoY rise in 3Q14/9M14 revenues to SGD40.1m/SGD121.7m respectively, aided by its Maldives resort acquisitions. DPU dropped 1.1% to 2.61 cents (3Q14) and 2.4% to 7.86 cents (9M14), partly on weaker Chinese tourist arrivals to Singapore, the Claymore Link mall’s ongoing refurbishments and the Maldives’ Jumeirah Dhevanafushi resort’s operating expenses not matched by its topline. Management earlier attributed this on seasonality, as 2Q/3Q was the resorts weakest quarters, with >70% of revenue contribution coming in 1Q/4Q on higher-yielding tourists from China, Europe and Russia. The trust’s YTD Singapore hotels revenue per available room (RevPAR) fell 1.6% YoY to SGD188, as the corporate and meetings business remained affected by tight travel budgets and the drop in Chinese tourists post China’s “forced shopping” ban in Oct 2013.
  • Tourism outlook unlikely to turn around in 2014. For the first 21 days of October, RevPAR for Singapore hotels decreased by 3.5%, vis-à-vis the same period in 2013, despite the 2014 Women’s Tennis Association Championships being held here. Along Orchard Road, Shangri-La Hotels and Resorts opened the 502-room Hotel Jen Orchardgateway on 15 Sep with an introductory room rate of SGD250/night. Thus, we remain wary of the near-term competition of CDL Hospitality Trusts’ Orchard Hotel.
  • Eyeing the Maldives. We expect the Maldives portfolio, ~10% of total net property income (NPI), to drive the major bulk of the trust’s 4Q14 DPU. Industry room inventory will probably continue to grow in Singapore with another 447 rooms slated for opening by end-2014. In 2015, an estimated 3,229 rooms are expected to open, further increasing room supply by 5.7% vis-à-vis 2014. The new room supply is likely to perpetuate the competitive environment going into 2015. We forecast 1% DPU CAGR over 2013-2016. We assume coverage with a NEUTRAL call and a DDM-derived SGD1.76 TP (from SGD1.63).


30 October 2014
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Delivering sturdy returns to unitholders

  • 2QFY15 DPU rose 10.4% YoY
  • Solid occupancy and rental reversions
  • Minimal impact from Hong Kong protests


2QFY15 results met our expectations

Mapletree Greater China Commercial Trust (MGCCT) reported its 2QFY15 results which exceeded its IPO forecast but were in-line with our expectations. Revenue rose 6.9% YoY to S$67.5m (9.2% above its projection) due to positive rental reversions from Festival Walk (FW) and Gateway Plaza (GP). DPU of 1.606 S cents represented a growth of 10.4% and came in 11.6% ahead of its forecast. For 1HFY15, revenue increased 7.7% to S$131.3m and constituted 47.8% of our FY15 estimate. DPU growth of 11.1% to 3.162 S cents (10.5% above MGCCT’s IPO forecast) formed 50.0% of our full-year figure.

Operating metrics exhibit resilience and comfort

Overall portfolio occupancy remains unchanged QoQ at a healthy 99.2%. Positive rental uplift of 21% and 32% were achieved at FW’s retail and GP’s office segments, respectively, for 1HFY14. 87% of MGCCT’s expiring leases for FY15 have already been committed. Its financial position also remains solid, with a comfortable gearing ratio of 37.7% and all-in average cost of debt of just 2.1%. YTD, MGCCT had already hedged ~90% of its HKD forecasted distributable income. During 2QFY15, it further hedged >70% of its 2HFY15 CNY distributable income and >80% of its 1HFY16 HKD distributable income, thus mitigating its FX volatility.

Maintain BUY

The pro-democracy protests in Hong Kong have put the spotlight on companies with large exposure there. MGGCT assured us that it has seen minimal impact for FW as it is not located in the affected areas. Going forward, it also does not expect its performance to be adversely affected by these demonstrations. In fact, some of its F&B tenants actually saw an increase in reservations as some consumers switched locations from the impacted areas. Overall tenants’ sales at FW grew 3.6% to HK$2.5b in 1HFY15 although footfall inched down slightly by 1.7% to 19.2m. We retain our projections as results were within our expectations. Since our ‘Buy’ initiation on 3 Oct this year, MGCCT’s share price has appreciated 6.1%, outperforming the STI’s and FTSE ST REIT Index’s -0.5% and 1.1% movement during the same period. We reiterate our BUY rating and S$1.00 fair value estimate.

CDL H-Trust – CIMB

30 October 2014
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A turnaround quarter

CDL-HT’s 9M14 results are in line with our estimate, with revenue coming in at 74% of our full-year forecast and DPU accounting for 72%. On the back of a remarkable 92% occupancy for its Singapore portfolio, CDL-HT achieved a slightly higher RevPAR of S$192 (+0.5% yoy) this quarter. With the variable income from Angsana Velavaru to be booked in 4Q and the decline in visitor arrivals from China stabilising, we reiterate our Add call and target price of S$1.88 as we expect CDL-HT to deliver a stronger 2H14 earnings.

Stable quarter

CDL Hospitality Trusts (CDL-HT) posted a gross revenue of S$40.1m (+11.9% yoy) and DPU of 2.61 Scts (-1.1% yoy) for 3Q14. This set of results is in line with our estimates, with revenue and DPU accounting for 24% of our full-year forecast. The higher revenue was mainly attributed to the recognition of the hotel revenue of Jumeriah Dhevanafushi (acquired on 31 Dec 2013) and higher occupancy (92%) for its Singapore hotel portfolio. However, this was offset by the operational cost of Jumeriah Dhevanafushi and higher interest cost, resulting in a 1.1% yoy dip in DPU.

Marking a turnaround

Although this quarter’s result is uninspiring at first glance, stripping out the earnings and costs associated with Jumeriah Dhevanafushi reveals that CDL-HT’s hotel portfolio sustained its earnings yoy. Compared to the 5.1% dip in NPI in 1H14, this quarter’s results show a respectable turnaround of the portfolio’s performance. We expect the Singapore hotel market to remain stable in 4Q due to the holiday season and six international sporting events to be held at Sports Hub in 4Q14. With another 447 hotel rooms (c.0.8% of total supply) scheduled for opening by year-end, the supply of new hotel rooms in FY14 is manageable.

Maintain Add

With Angsana Velavaru’s variable rent (c.S$3.1m in FY13) due to be recognized in 4Q and the decline of Chinese visitors to Singapore (-27.4%/-28.2% in July/August vs. -47.1% in 1H14) stabilising, we remain confident that CDL-HT will post stronger results in 2H14 than in 1H14. Currently trading at 7.1% FY15 dividend yield vs. the REITs’ sector average of 6.9%, we do not find CDL-HT’s valuation aggressive and have maintained our Add rating and TP of S$1.88.

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