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CDL Hospitality Trusts Q1 DPU down 9% from a year ago at 2.22 Singapore cents

CDL Hospitality Trusts (CDLHT) reported on Friday that the income available for distribution per stapled security after deducting income retained for working capital is 2.22 Singapore cents for the first quarter of 2016 (Q1), down 9 per cent compared to the 2.44 Singapore cents recorded a year ago.

CDLHT is the stapled group comprising CDL Hospitality Real Estate Investment Trust (H-Reit) and CDL Hospitality Business Trust (HBT). It owns 15 hotels, two resorts and a retail mall comprising a total of 4,909 rooms.

It said that net property income (NPI) stood at S$33.7 million for Q1, a decline of 2.3 per cent from a year ago.

Contributions from Singapore hotels and Maldives resorts declined due to the soft trading environment, while Australia hotels recorded lower rent contribution due to local currency weakness against the Singapore dollar and a smaller variable income for FY 2015.

The decline in NPI was mitigated by inorganic contribution from Hilton Cambridge City Centre and higher rent contribution from the New Zealand hotel due to the recognition of a full year variable income of S$0.5 million for the first time, triggered by strong revenue performance in FY 2015.

Total income available for distribution (after deducting income retained for working capital) was S$21.9 million, down S$2 million, or 8.5 per cent from a year ago. This excludes contribution from the Japan hotels, which is only available for distribution in the second quarter once the financial results of the group's Japanese subsidiary for the fiscal period ended March 31, 2016 are audited.

Vincent Yeo, chief executive officer of CDLHT's managers, said that the weak global economy has given rise to a challenging operating environment.

"Although there has been some improvement in visitor arrivals, corporate expenditure remains constrained which has affected our core Singapore portfolio performance."

He noted that the performance has also been affected by the group's ongoing asset enhancement initiatives at Grand Copthorne Waterfront Hotel and M Hotel which are slated for completion in 2016.

"However, we believe that by augmenting our assets at this opportune time, it will enhance their competitive position and allow them to capitalise on the positive mid-to-long term outlook of Singapore tourism sector," Mr Yeo said.

Revenue per available room (RevPAR) for its Singapore hotels fell by 6.9 per cent from a year ago to S$161 mainly due to the competitive trading environment induced by new hotel room supply and an uncertain economic outlook. The renovation at M Hotel and Grand Copthorne Waterfront Hotel, coupled with weak corporate demand experienced by the group, had affected the performance of the Singapore hotels. The Easter holiday in March this year compared with April last year also affected trading performance as corporate activity is generally more subdued during the holiday periods.

The outlook for the hospitality sector in Singapore remains uncertain. Room rates are expected to stay competitive as room inventory grow by an estimated 3,930 rooms in 2016, further increasing room stock by 6.5 per cent.

Mr Yeo said: "With debt headroom to further expand, we are still looking for acquisitions to enhance our returns to unitholders and diversify our income."