SINGAPORE (July 31): CDL Hospitality Trusts (CDLHT) reported a 3.3% dip in distribution per stapled security for the 2Q19 ended June.

The weaker DPSS also brought DPSS for 1H19 ended June to 4.16 cents, down 3.5% from a year ago.

See: CDLHT posts 3.3% lower 2Q19 DPSS of 2.07 cents on lower sales, retention of distribution

To be sure, CDLHT’s 1H2019 revenue declined 5.8% to $93.8 million from a year ago, mainly led by the closure of Raffles Maldives Meradhoo since last June.

Other contributing factors included weaker performances from its hotels in Singapore, New Zealand, Australia and the UK.

While Singapore’s hotel occupancy rose 0.2% points y-o-y to 85.7%, average room rates declined 2.3% y-o-y to $179, translating to a 2.1% drop in 1H2019 RevPAR to $154.

This was due to slower visitor growth and a softer corporate event calendar which was affected by trade tensions and regional elections, as well as the absence of key events such as the biennial Singapore Airshow, Asean Ministerial Meeting series and Food&HotelAsia.

CDLHT’s RevPAR dipped by 1.7% from the previous year to $151, on the back of room displacements from ongoing room refurbishments at Orchard Hotel and pipe works at M Hotel and Copthorne King’s Hotel.

CDLHT’s overseas market was not spared either. Raffles Maldives was affected by a rebranding exercise, and Australia and New Zealand markets reporting weaker performances affected by a weaker currency and price competition respectively. NPI performance of overseas properties in Maldives, and Japan were also lower y-o-y.

However, this was more than offset by positive contributions post the acquisition of Hotel Cerretani Florence -- which saw RevPAR growth of 5.1% y-o-y -- and improved contributions from Pullman Hotel Munich and UK hotels, despite unfavourable forex impact during the quarter.

Despite a sluggish 2Q19, analysts remain bullish on CDLHT, saying it is capable of bouncing back in 2H19.

With a large proportion of room renovations for Orchard Hotel completed in 2Q19 and Raffles Maldives Meradhoo on track for a full launch in 4Q19, analysts expect sequential improvement in earnings over the next few quarters.

A constructive supply outlook and earlier investments in Europe are also set to bolster a stronger set of results for 3Q19.

See: CDL Hospitality Trusts kept at ‘add’ on acquisition of Florence Hotel

In addition to a portfolio valued at $700,000 per key, which is below asking prices for Singapore hotels in excess of $1 million per key, CDLHT’s well-positioned properties within Central Singapore presents opportunities for portfolio reconstitution to drive value for unitholders.

In addition, an above-sector-average DPU growth is expected in FY2020-21 during the long-awaited RevPAR recovery phase that could last through 2022.

DBS Research, CGS-CIMB Research, Maybank KimEng and Daiwa Capital are all maintaining their “buy” calls on CDLHT, with target prices of $1.80, $1.92 $1.80 and $1.73.

As at 4.44pm, units in CDLHT are trading 2 cents lower at $1.64, which translates into a dividend yield of about 5.2% for FY19F, according to DBS.