CDL Hospitality Trusts Latest Earnings: What Investors Should Know

CDL Hospitality Trusts (SGX: J85) released its fourth quarter earnings report yesterday (note: 28 January 2015). The reporting period was from 1 October 2014 to 31 December 2014.

CDL Hospitality is primarily in the business of hotels and currently has 16 properties under its portfolio. The properties are located in Singapore, Australia, New Zealand, and the beautiful Maldives. At the local front, the trust owns recognisable hotels such as Orchard Hotel, Grand Copthorne Waterfront Hotel, Novotel Singapore Clarke Quay, and the M hotel.

CDL Hospitality is structured as a stapled security, where one stapled security comprises of a pair of a real estate investment trust (REIT) and a business trust. To learn more about the differences between the two trusts, click here.

Meanwhile, you can also read up about the trust here and catch the previous earnings report here.

Financial Highlights

Here’s a rundown on the financial figures:

  1. Gross revenue rose to $45.1 million in the latest quarter, up 14.4% from the quarter a year ago. For the full financial year ended 31 December 2014 (FY2014), gross revenue was up by 12.1% over 2013.
  2. Net property income (NPI) for the quarter rose by 6.0%. NPI for the quarter came in at $38.6 million, compared to $36.4 million for the same quarter a year ago. NPI for the full year was up only 2.3% from a year ago.
  3. Distribution per stapled security (DPS) for the quarter will be 3.46 cents, a 7.2% increase from 3.24 cents in the fourth quarter last year. The REIT completes the financial year by distributing 12.19 cents per stapled security for the full year.
  4. The total property portfolio was valued at a little under $2.4 billion, with a net asset value per unit of $1.65.

Foolish investors might want to keep up an eye with the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded, and its sensitivity to the interest rate environment. This is summarized below.

Gearing Ratio 31.70%
Interest Cover Ratio 8.6 times
Weighted Average Term to Maturity 2.8 years
Weighted Average Cost of Debt 2.30%
Fixed Rate Borrowings 41%
Debt Value $777 million

Source: REIT earnings presentation

For the quarter, CDL Hospitality displayed a solid debt profile with a weighted average cost of debt stands at a 2.3% and an interest cover ratio of 8.6. Of the S$777 million in debt outstanding, S$318 million becomes due in FY2015. That said, CDL Hospitality can still tap on its un-utilized debt facilities for any refinancing needs.

As always, the progress in refinancing of debt is where Foolish investors should keep a watchful eye

Operational Highlights

For the FY2014, more than 60% of revenue originated from Singapore, therefore the industry developments are worth watching. The business of CDL Hospitality can be affected by tourist arrivals, and the demand-supply conditions in the countries that it operates in. On this topic, the management cited statistics from Singapore Tourism Board, where total tourist arrivals declined by 3.4% on a year on year comparison for the first 11 months of 2014. Furthermore, the industry room inventory is expected to grow by 5.7% in 2015. Taken together, a competitive environment is expected.

The trust completed two Japan hotel acquisitions during the quarter. It ended the financial year with a 89.1% annual rate for its Singapore hotels.

Looking forward,  Mr Vincent Yeo, Chief Executive Officer of the manager, had this to add:

We are encouraged by the company’s performance given the softer trading conditions in some of our markets. Our strategy of diversifying into selected key markets has augmented the overall portfolio performance. Our recent acquisition of the two Japan hotels in December 2014 is expected to benefit our portfolio of the two Japan hotels in December 2014 is expected to benefit our portfolio income stream further.

Despite the challenging market conditions of the Singapore tourism industry due to the drop in tourist arrivals, it is heartening to see our Singapore Hotels achieved a record high annual occupancy of 89.1%. For 2015, we are maintaining a cautious outlook for our portfolio hotels as a result of macroeconomic uncertainty.

Foolish summary

CDL Hospitality last traded at S$1.80 on Wednesday. This translates to a historical price-to-book ratio of 1.09 and a distribution yield of around 6.8%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.