Month: May 2010
CDL H-Trust – Phillip
1QFY10 Results
• 1Q10 revenue of $26.6 million, net property income of $24.7 million, distributable income of $21.6 million
• 1Q10 DPU OF 2.32 cents
• Maintain Hold, fair value of $1.96
Strong growth
CDL HT continued to register strong growth in 1Q10. It recorded 1Q10 revenue of $26.6 million (+18.1% y-y, +1.7% q-q), net property income of $24.7 million (+20.3% y-y, -0.1% q-q) and distributable income of $21.6 million (+18.9% y-y, -0.3% q-q). The trust retained $2.16 million from the distributable income and 1Q10 DPU was 2.32 cents (+17.8% y-y, -13.1% qq). Occupancy for the Singapore hotels was 84.3%, an improvement of almost 10% points from 1Q09. The q-q drop in occupancy can be attributed to the seasonal factor of the tourism sector as the peak season tends to be in the later half of the year. However we are also concern that the drop may be due to increased competition from the new supply of hotel rooms. RevPar improved 16% to $174, the highest over the last five quarters. Besides improvements in the hotel growth drivers, contributions from the recently acquired five Australia hotels accounted for approximately half of the y-y growth in revenue. Even the retail space that CDL HT owns is showing signs of a turnaround. Occupancy for the Orchard Hotel Shopping Arcade was flat at 81.5%, however average monthly rent increased 4% from $7.35 to $7.64 per month. Revenue contributions from Singapore, New Zealand and Australia are 84.5%, 8.1% and 7.4% respectively.
CDL HT has total debt of $546.3 million with gearing at 30.9%. $234.3 million is due in 2011.
The results of CDL HT reflect the improving tourism sector. The Singapore Tourism Board has a forecast of 11.5-12.5 million tourist arrivals for 2010, a 19-29% increase over 2009. In the first 3 months of 2010, tourist arrivals showed double-digit % growth. Hotel room occupancy held up well above the 80% mark. RevPar showed positive y-y growth for the, a vast improvement over the whole of 2009 whereby every month showed a y-y drop. With the infrastructure in placed and the line-up of events, we are optimistic that the official forecast should not be hard to achieve, barring external shocks.
CDL HT occupancy and RevPar compare well against the industry average. CDL HT occupancy of 84% is in-line with the industry average of 83% and RevPar is 6.1% above industry average of $164. As mentioned earlier, we are slightly wary of the competition from the new supply of hotel rooms. As we take a closer scrutiny on the tourist arrivals number, 1Q10 registered 2.693 million visitors, a slight increase over 4Q09 arrivals of 2.646 million, however CDL HT occupancy dropped 4.5% from 88.9% in 4Q09 to 84.3% in 1Q10. We are keeping our Hold recommendation and fair value of $1.96.
ART – Kim Eng
Look beyond the blip
Event
ART’s 1Q10 DPU of 1.66 cents is 12% below our expectations and 6% lower yoy due to one‐off expenses. Revenue grew by 3% yoy to $43.5m, driven by higher overall occupancy rates. We expect better performance in 2H to be led by the Singapore and Philippine markets. ART should remain on track to meet our full‐year DPU forecast of 7.83 cents. We upgrade ART to Buy on valuation grounds.
Our View
ART’s improved performance was mainly led by a recovery in REVPAU in Singapore, the Philippines and China as hospitality demand increased in line with higher tourist arrivals and corporate travels.
The operating performance in Australia, Indonesia, Japan and Vietnam, which account for the remaining 52% of gross profit, should remain stable in view of strong occupancy rates, though partially offset by the pressure on room rates.
With gearing of 42.1%, ART has debt headroom of about $250m for acquisitions before hitting its maximum target of 50%. While asset enhancements and acquisitions remain its near‐term focus, asset divestment is also possible if the proceeds can be deployed towards yield‐accretive acquisitions. Loans of $399m are due for refinancing in 2011.
Action & Recommendation
Increasing tourist arrivals and corporate travel are key drivers for re‐rating. Asset divestment plans are still in the pipeline. We upgrade ART to Buy on valuation, based on forward yield of 7% and total return of 29%.
CDL H-Trust – BT
CDLHT Q1 net income rises 20% to $24.7m
CDL Hospitality Trusts (CDLHT) posted improved results for the first quarter ended March 31 on the back of higher room rates, occupancies and contributions from recently acquired hotels.
‘We remain optimistic about the continued growth for hospitality demand, driven by a rebound in business travel and the revitalisation of Singapore’s tourism and retail landscape,’ said CEO of M&C Reit Management, Vincent Yeo.
CDLHT raked in net property income of $24.7 million in Q1, up 20 per cent from a year ago. Contributions from five hotels it bought in Australia in January boosted earnings. In Singapore, there was also a 15.8 per cent increase in room revenue per available room (RevPAR) – to $174, from $150.
In line with the economic recovery, demand for hotel rooms was very strong, Mr Yeo said. ‘High occupancies of 84 per cent were achieved, considerably exceeding that for Q1 2009 and matching previous Q1 peaks since the inception of CDLHT.’ The average occupancy rate in Q1 2009 was about 75 per cent.
He added that the average daily rate rebounded year-on-year for the first time since Q2 2008. It was $207 in Q1, 3 per cent more than the $201 a year ago.
As net property income grew, so did income available for distribution. The latter was $19.4 million in Q1, which is 18 per cent higher than in the same period last year.
Income available for distribution per stapled security in Q1 – after deducting income retained for working capital – was 2.32 cents, up 18 per cent from 1.97 cents year-on-year.
On an annualised basis, the latest Q1 figure is 9.41 cents. Based on CDLHT’s closing unit price of $1.90 on Thursday, this works out to an annualised distribution yield of 4.95 per cent.
The counter gained three cents to end trading at $1.93 yesterday.
CDLHT said that its strong performance in Q1 has continued into Q2 – the RevPAR for its hotels in Singapore have grown around 38 per cent in April. It also expects average room rates to continue registering healthy increases compared with last year.
It is counting on the opening of more attractions to draw more visitors. For instance, more areas at Resorts World Sentosa will be operational in the later part of this year and in 2011.
As at March 31, CDLHT’s debt-to-asset ratio was 30.9 per cent, much higher than the 19.1 per cent three months ago.