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CDL Hospitality Trusts See Dip In Income

CDL Trust logo CDL Hospitality Trusts (SGX: J85), or CDLHT, the first hotel real estate investment trust in Asia (excluding Japan), churned in lower gross revenue of S$35.9 million in third quarter of 2013 (3Q 2013). This was a small decline of 0.8% year-on-year.

The drop in gross revenue was mainly due to lower gross revenue from its Singapore hotels, which include Orchard Hotel and Orchard Hotel Shopping Arcade, Grand Copthorne Waterfront Hotel and M Hotel. The Australia hotels saw its fixed rent contribution go down year-on-year due to the weakened Australian dollar. On a positive note, CDLHT’s resort in Maldives – Angsana Velavaru resort – saw a S$1.9 million revenue boost. The resort was acquired by the hospitality trust in January this year.

The overall net property income for the quarter was 1.7% lower at S$33.0 million as compared to 3Q 2012. Income available for distribution for 3Q 2013 was 2.2% lower year-on-year at S$25.7 million. The income available for distribution per unit (DPU) was 2.64 cents, as compared to 2.72 cents seen in 3Q 2012. This translates to a dip of 2.9%.

CDLHT said that the weaker year-on-year operating performance for the Singapore hotels was due to reduced corporate demand, stemming from the uncertain global economy. The trust also saw increased competition from new hotels that came on the pipeline.

For 3Q 2013, the average occupancy rate, average daily room rate and room revenue per available room (RevPAR) for the Singapore hotels were at  87.6%, S$218 and S$191 respectively. This was a decrease of 0.7%, 5.6% and 6.4% respectively as compared to the previous year. RevPAR is obtained by multiplying the average daily room rate by its occupancy rate.

As at 30 September 2013, CDLHT has a gearing of 28.1% and has an interest coverage ratio of 8.7 times. The net asset value is at $1.58.

Comparatively, other hospitality trusts listed in the Singapore Exchange such as Far East Hospitality Trust (SGX: Q5T) and OUE Hospitality Trust (SGX: SK7) have a gearing ratio of 29.3% and 33.2% respectively.

CDLHT feels that the operating environment for the local hotel scene is expected to continue to be competitive with over 2,900 new rooms coming on board next year.

On the brighter side, Orchard Hotel Shopping Arcade will undergo a 12-month asset enhancement initiative which is scheduled to commence by late this year, repositioning the arcade as a family-friendly mall with improved retail experience.

The shares opened at $1.68 this morning. The price-to-book ratio stands at 1.06 and the dividend yield is at 6.51%, taking into account the latest DPU and the previous three quarters’ DPUs.

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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.