3 Things You Should Know About CDL Hospitality Trusts’ Latest Quarterly Earnings

Highlights from the trust’s latest financial report card.


CDL Hospitality Trusts

CDL Hospitality Trusts (SGX: J85) is a stapled trust (consisting of CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust) which owns hospitality assets in Singapore, New Zealand, Australia, and Maldives.

Around our island, the trust’s properties include Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel, Novotel Singapore Clarke Quay and Studio M Hotel.

It released its second quarter earnings on Thursday and here are three points to pay attention to.

1. Financial performance and position

Gross revenue for the quarter rose 6.4% year-on-year to S$37.9 million due mainly to the recognition of revenue from Jumeirah Dhevanafushi in Maldives. The hotel was acquired at the end of 2013 and it contributed S$4.6 million to the trust’s top-line.

But despite the revenue growth, the trust’s net property income dipped 3.9% year-on-year to S$31.3 million. This was mainly due to a few factors: 1) Reduced rent contribution from the Singapore hotels and Claymore Link, the shopping arcade that’s linked to Orchard Hotel, and 2) lower fixed rent contribution from the trust’s Australian hotels on the back of a weaker Australia dollar.

All told, the trust’s income to be distributed per stapled security (DPS) came up to S$0.025; that’s an 8.1% decline compared to the DPS of S$0.0272 a year ago.

CDL Hospitality Trusts’ balance sheet looks strong. As of 30 June 2014, the gearing ratio of the trust is at 29.5%, an improvement from the ratio of 29.9% seen three months ago. 57% of the trust’s total borrowings have fixed interest rates and the average term to maturity for all the borrowings stand at around 2.1 years. The trust’s net asset value per unit also improved to S$1.641 from S$1.635 seen at the end of 2013.

2. Singapore hotels’ performance

The opening of new hotels here resulted in price competition while tight corporate travel budgets affected the demand for meetings. Therefore, the local hotels didn’t perform as well as it could have. Revenue from the hotels in Singapore contributed to 65.4% of the trust’s total gross revenue for the quarter.

Average occupancy rate at the local hotels had slipped to 86.1% from 87.7% the previous year while the average daily rate had decreased 4.1% year-on-year to S$211. RevPAR (Revenue per available room) was down 6.2% to S$181 for the year.

3. Outlook for the trust

There will be a ramp up in the supply of new rooms coming on-board; around 1,577 new hotel rooms are expected to be made available this year in Singapore. Therefore, CDL Hospitality Trusts feels that room rates may remain competitive as “new hotels seek to build their base in an environment of constrained corporate travel budgets”.

That said, the long-term outlook for Singapore’s tourism market remains buoyant as our country continues to enhance its reputation as a leading destination for meetings and exhibitions globally. The continual development and introduction of leisure attractions and sporting events do help as well.

Over in Australia, hotel demand may continue to be affected by both the slower pace of the economy there as well as lower levels of mining activities. But, any negative impacts from the aforementioned can be offset by the trust’s defensive lease structure, which provides largely fixed rents to the trust.

CDL Hospitality Trusts closed at S$1.785 on Thursday. It’s selling for 1.09 times its book value at that price and it carries a distribution yield of 6.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.