Thursday, January 26, 2017

CDLHT - Q4 FY2016 Results & Thoughts

This is one of my biggest holding position so I thought I should write my thoughts on their latest results.

If you just browse through their results on a glance, you should see flat results for Q4 thinking that they are doing better. They are actually not and the same issues surrounding the Singapore and Maldives market continue to languish them low. Having said that, I do see some stability in their ARR and Revpar and my thesis remains that the next few years supply for the Singapore (major) market are trending lower at 3.4% than previously known.

I'll try to dissect them through the several markets they have presence in.

On the Singapore market, Revpar continues to hit record low of $154 (The last low over the past 10 years is $149 during GFC days) and we have not seen a reversal of the bottom just yet. I wrote in my last article (Link Here) that I am predicting this to bottom out and a reversal over the next couple of quarters ahead. My thesis still remains.

Singapore

On the Maldives market, while tourism arrival is growing well over the past couple of years and is expected to reach 2m customers a year by 2020, the strengthening of the USD and corresponding room rates downwards adjustment means that NPI for the quarter is down.

Personally, I feel it's a bit disappointing because they had intended to venture out of the Singapore market and go into Maldives but face similar troubles in this market. If not for the minimum guaranteed income provided for the Angsana Velavaru resort, the NPI registered would have been a lot lower.

Maldives


If there are any positives coming out of the news, it is that the Japan market seems to be reversing out and will continue to outperform in the next 3 years.

The Japan tourism board is running an initiatives to boost tourism growth and the recent approval of the integrated resorts will help to boost tourism growth in the industry.

Between now to 2020, tourism growth is expected to grow at a CAGR of 13.6%. This coincides with the 2020 Olympic which Japan is hosting and the boost in the next 3 years will help the Japan market immensely.

Japan

The other positive news is coming out of the New Zealand market.

They changed the lease structure to include a variable component now on top of the lower fixed rent. This means that if the hotel is doing well, then we should see a much improvement in the variable rent. This is what happened as NPI doubled after the changes.

New Zealand

Final Thoughts

2H16 DPU is at 5.55 cents and will be paid in February.

Full year dividend is at 10 cents and at current market price it translates into 7.1% yield which I thought its decent.

Even though there are some persistent headwinds and the incoming threat from Airbnb alike, I think valuations have reflected the headwinds and we should see stronger performance in the years ahead.

The share price is up 2.2% today after the release of the results today, which I think represents the general bullishness of the market from the public quite unwarranted.


15 comments:

  1. Replies
    1. Poor management. No value to shareholders after those years.

      Delete
    2. Hi Wilson

      I assume you are talking about Fraser Hospitality Trust (while Sweet Retirement talks about Far East Hospitality Trust).

      Fht has some good assets overseas. I think its still too early to make judgment on their management and their performance but over the years I think we should span out to see the performance of the hotels and the type of acquisitions they make.

      Still in the monitoring for me.

      Delete
  2. Agree that the market is getting a little bit of unwarranted bullishness...

    ReplyDelete
  3. Hi B, what do you think about the management for CDLHT? Will they bring value to shareholders?

    ReplyDelete
    Replies
    1. Hi SR

      I think for me CDLHT has a very good board directors since their sponsor is obviously cdl which is a blue chip developers that I like very much.

      Over the years, they've also ventured out pretty well (though there are some diversification which I dont really like) and serve shareholders well.

      Delete
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  5. The market has been overly bullish since Trump won. I don't quite understand all the hype. There are no real signs that our local economy is going to improve tremendously. I am quite puzzled by this bull run.

    For several of my holdings, I noticed that the results are not fantastic and some dividends have decreased.

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  6. B, are you concerning at all what's going on in America - de-globalization?

    Anyhow, that is why I'm moving my cash into housing for now and start building cash again.

    ReplyDelete
    Replies
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      I read your blog, particularly about the housing renovations and how you rent them out, with a lot of envy.
      "Moving cash into housing" is a lot harder here in SG, because you'd have to move a hell lot of it!

      TTI

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