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What Investors Need to Know about CDL Hospitality Trust’s Latest Third Quarter Earnings

CDL Hospitality Trusts (SGX: J85), which owns 12 hotels and two resorts located in Singapore, Australia, New Zealand, and Maldives, released its third quarter results yesterday morning.

In our shores, the trust has six hotels – Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel, Novotel Singapore Clarke Quay, and Studio M Hotel – as part of its portfolio. These hotels are an important part of the trust’s business as they make up 77.1% of the trust’s portfolio value.

For the quarter ended 30 September 2014, CDL Hospitality Trust’s gross revenue went up from S$35.9 million a year ago to S$40.1 million, an increase of 11.9%. The growth came mainly on the back of recognition of revenue from the Jumeirah Dhevanafushi resort in Maldives, which was acquired at the end of 2013. This was partially offset by decreased income from Claymore Link, a shopping arcade that’s linked to Orchard Hotel, as a large part of it was closed for asset enhancement works. The mall is expected to commence operations in the second quarter of next year.

The increase in gross revenue helped drive a 2.4% uptick in net property income for the quarter to S$33.8 million.

Despite the top-line growth, the trust’s income to be distributed per stapled security (DPS) came up short as it declined by 1.1% year-on-year to 2.61 Singapore cents.

On the operational front, a record high occupancy level of 92% was achieved for the hotels in Singapore due to more business volume. Having said that, average daily rates dipped 4.1% year-on-year to S$209, mainly due to an increase in supply of new hotel rooms, lesser tourist arrivals, and a cautious corporate spending environment. Consequently, room revenue per available room (RevPAR) increased slightly by 0.5% to S$192. RevPAR is obtained by multiplying the average daily rate by its occupancy rate.

As of 30 September 2014, CDL Hospitality Trusts has a gearing ratio of 30.2%, a slight uptick from the ratio of 29.5% seen at the end of June this year. In comparison, other hospitality trusts listed here, like Far East Hospitality Trust (SGX: Q5T) and OUE Hospitality Trust (SGX: SK7), have a gearing ratio of 30.9% and 32.7% respectively, as of their latest available results.

Going forward, the hospitality trust said it will continue looking for acquisition opportunities to enhance its returns to unit-holders, given its healthy gearing and ample debt headroom. Also, an important trend affecting the growth of CDL Hospitality Trusts would be tourist arrivals in Singapore, which in turn, depends on Singapore’s attractiveness as a tourist destination;  these are things investors might want to keep an eye on.

CDLHT started trading at S$1.69 today. This translates to a distribution yield of 6.4% and a price-to-book ratio of 1.06.

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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.