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CDL Hospitality Trusts Latest Earnings: What Investors Should Know

This morning, CDL Hospitality Trusts  (SGX: J85) released its earnings report for the quarter and year ended 31 December 2016.

As a quick introduction, CDL Hospitality Trusts is a stapled trust that comprises a real estate investment trust (REIT) and a business trust. (To learn more about the differences between the two types of trusts, head here.)

CDL Hospitality Trusts is in the business of owning and managing hotels and resorts. Currently, it has 17 properties under its portfolio and they are located in Singapore, Australia, Japan, the United Kingdom, New Zealand and Maldives. At the local front, the trust owns hotels such as Orchard HotelGrand Copthorne Waterfront HotelNovotel Singapore Clarke Quay and M Hotel.

You can read more about the trust in here and catch the results from its previous quarter here.

Financial highlights

The following’s a rundown on some of CDL Hospitality Trusts’ latest financial figures:

  1. Gross revenue came in at $48.3 million in the reporting quarter, down 3.6% from the same quarter the year before. For the full year, gross revenue was up by 4.9% to $180.9 million.
  2. Net property income (NPI) for the quarter slipped by 0.3% to $37.7 million. NPI for 2016 was up 0.4% to $137.6 million.
  3. For the fourth quarter of 2016, distribution per stapled security (DPS) was 3.11 cents, a 3.3% increase from the 3.01 cents doled out in 2015’s fourth quarter. For 2016, CDL Hospitality Trusts’ DPS is 10.00 cents, down 0.6% from 2015’s 10.06 cents.
  4. The trust has total assets of $2.4 billion. It ended 2016 with a net asset value per stapled security of $1.55, down from the $1.58 seen in 2015.

Foolish investors may also want to keep an eye on 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. The table below shows CDL Hospitality Trusts’ current and year-ago debt profile:

2017-01-26 CDL Hospitality Debt Table
Source: CDL Hospitality Trusts’ earnings presentations

CDL Hospitality Trusts closed the year with some changes in its debt profile. Although its weighted average term to maturity and percentage of debt on fixed rates had both improved, its interest cover ratio, total debt value, and gearing had all taken small steps backwards.

The REIT does not have any loans coming due in 2017, but does have a big slug of debt maturing in 2018.

Operational highlights

The business of CDL Hospitality Trusts can be affected by tourist arrivals and the demand/supply conditions in the hospitality markets of the countries it operates in.

In its earnings release, the trust cited statistics from the Singapore Tourism Board that showed total tourist arrivals had increased by 7.9% year-on-year for the first 11 months of 2016. But, room inventory in Singapore is expected to grow by 5.9% in 2017. Taken together, CDL Hospitality Trusts’ manager expects room rates here to remain competitive. For 2016, close to half of the REIT’s revenue originated from Singapore.

CDL Hospitality Trusts’ Singapore properties achieved an average occupancy rate of 83.6%, an average daily rate of $187, and revenue per available room of $160 in 2016. These numbers were all lower than in 2015 (87.7%, $199, and $175, respectively).

Vincent Yeo, the chief executive of the trust’s manager, shared the following comments on CDL Hospitality Trusts’ performance for the year:

“We are pleased to have been able to deliver stable returns to Stapled Securityholders under challenging economic conditions globally.

A few of our markets, particularly our core market, Singapore, have faced strong headwinds in their respective trading environments which have been mitigated by our diversification strategy implemented in the past few years. Hilton Cambridge City Centre has strengthened our portfolio inorganically and Grand Millennium Auckland’s new lease structure allows CDLHT to leverage on the buoyant hospitality market in New Zealand.”

CDL Hospitality Trusts’ securities opened trading at a price of S$1.40 each today. This translates to a historical price-to-book ratio of 0.9 and a distribution yield of 7.1%.

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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 Chin Hui Leong does not own shares in any companies mentioned.