SINGAPORE (May 3): OCBC Investment Research is maintaining its “hold” call on CDL Hospitality Trust with an unchanged fair value of $1.60 despite making adjustments after the announcement of its 1Q18 results, which came in below expectations at 22% of OCBC’s initial full-year DPU forecast.
The earnings miss is in spite of CDL HT’s higher revenue and NPI for the quarter, a result of improved RevPAR in the Singapore portfolio which also helped to boost overall portfolio performance – albeit offset in part by softer trading performance from the Japan Hotels, Maldives Resorts and Hilton Cambridge City Centre.
See: CDL Hospitality Trusts' 1Q DPS rises 7.4% to 2.17 cents on improved portfolio performance
In a Thursday report, lead analyst Deborah Ong says she sees operational upside for the trust, but does not find its valuations attractive as of yet.
On CDL HT’s 1Q earnings performance, she notes that quarterly DPU was skewed by substantial acquisitions made in 2H17 as well as a change in New Zealand's rental structure in 2H16, but nonetheless sees an acceleration in the growth of CDL HT’s Singapore hotels given how last year’s supply injection was backend-loaded.
Looking ahead, the analyst expects lower contributions from the Australia portfolio as the Mercure and Ibis Brisbane properties were divested in Jan 2018. She also thinks New Zealand RevPAR growth is likely to moderate after seeing 4.6% growth in local currency terms due to the high base effect.
“We now assume $5 million of capital distributions in FY18F (~0.42 S cents per unit), to smoothen out the loss in income from the Brisbane divestment as well as from the rebranding at Maldives. While we still see operational upside from CDL HT’s Singapore portfolio, we do not find valuations as of 30 Apr attractive,” says Ong.
As at 2.47pm, units of CDL HT are trading 3 cents lower at $1.74 or 5.4 times FY18 DPU yield.
