The Motley Fool

CDL Hospitality Trusts: DPU Drops in Latest Earnings

CDL Hospitality Trusts (CDL-HT) (SGX: J85), one of Asia’s leading hospitality trusts with a portfolio of 16 hotels and two resorts comprising a total of 5,088 rooms, on Tuesday reported that its distribution per unit (DPU) for the latest quarter fell. The drop was due to downtime for two of its properties undergoing asset enhancements.

The latest report was for the first-quarter earnings results for the year ending 31 December 2019. The REIT’s properties are geographically spread across, Singapore, Australia, Japan, New Zealand, the UK, Germany, and the Maldives.

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Let’s take a quick look at the results.

  1. Revenue for the reporting quarter dropped by 10.6% year-on-year to S$46.3 million. Following suit, net property income decreased by 10.7% to S$33.8 million. The steep drop in net property income was attributed to asset enhancement works at two of the properties resulting in room inventory being reduced.
  2. The pullback in revenue and net property income resulted in a decline in distributable income of 3.0% to S$25.3 million over the same period. This resulted in downward pressure of 3.7% in distribution per unit (DPU) which came in at 2.09 Singapore cents.
  3. Next, let’s look at CDL-HT’s debt profile. As of 31 March 2019, its gearing stood at 35.2%, increasing from 34.2% sequentially. The weighted average annualised interest rate stood at 2.4% with an average debt duration of 2.7 years. Around 60% of the REIT’s debt is on fixed-rate loans.
  4. As for operational statistics, the trust’s portfolio had an average occupancy rate of 87.3% at the end of the quarter, increasing from 87.6% year-on-year. The average daily rate and revenue per available room came in at S$180 and S$157 dropping 2.0% and 2.4% year-on-year, respectively.
  5. CDL-HT’s net asset value (NAV) per unit came in at S$1.48 at the end of the quarter.

The Road Ahead

Mr. Vincent Yeo, Chief Executive Officer of CDL-HT’s managers, had this to say on its most recent quarter and the outlook:

“CDL-HT is going through a transition period due to major asset enhancement initiatives taking place which have dampened our overall results in the near term. Despite the effect of global trade uncertainties and moderating economic growth, the benign hotel supply growth in the next few years will provide a constructive environment for improvement in the performance of the Singapore hotel sector. Moreover, we are encouraged that the Singapore government has set in place plans to transform key urban areas and is investing in tourism-related infrastructure over the next decade.”

“With a strong balance sheet and ample debt headroom, we will continue to seek acquisitions as a key priority. Moreover, we will invest in maximising the long-term potential of our properties. We will also continue to evaluate suitable divestment opportunities as they arise to unlock underlying asset values and/or recycle capital for better returns.”

Units of CDL-HT closed on Tuesday at S$1.60 apiece, sporting a price-to-book ratio of around 1.07 and a dividend yield of 5.1%.

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Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own shares in CDL Hospitality Trusts.

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