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Broker's take: OCBC downgrades CDLHT to 'hold' on coronavirus outbreak

OCBC Investment Research on Monday downgraded its call on CDL Hospitality Trusts (CDLHT) to "hold", citing that the coronavirus outbreak could weigh on travel demand. 

The brokerage has also lowered its fair value estimate on the counter to S$1.62, from S$1.69 previously. 

As at 11.43am on Monday, stapled securities in CDLHT were trading at S$1.54, down S$0.02, or 1.3 per cent. 

CDLHT's management has disclosed that booking cancellations so far have not materially impacted their business, and that CDLHT's Singapore revenue per available room, or RevPAR, rose about 4 per cent year on year for the first 28 days of January 2020, OCBC noted. 

"However, as Singapore is CDLHT's key and best performing market, whereby Chinese tourists contributed about 10 per cent of its Singapore business, CDLHT's performance could be badly hit, should the situation in Singapore escalate further," wrote OCBC analyst Chu Peng. 

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She added that for fiscal 2019, Singapore contributed about 62.3 per cent of CDLHT's net property income (NPI). 

Nonetheless, the stapled group's Q4 results came in within expectations, OCBC noted, with NPI falling 1.2 per cent to S$38 million from a year ago, pulled down by lower contributions from CDLHT's overseas market, which more than offset the strong performance from its Singapore hotels.

Distribution per unit for the fourth quarter ended Dec 31 was flat at 2.77 Singapore cents. 

Separately, DBS Group Research on Monday also downgraded its rating on Far East Hospitality Trust to "hold", citing "cautious sentiment" shrouding Singapore hoteliers amid the epidemic. 

Singapore Minister for Trade and Industry, Chan Chun Sing on Sunday said that the Wuhan virus outbreak is likely to have a much wider and deeper impact on the world economy than the severe acute respiratory syndrome (Sars) episode of 2003.

The latest coronavirus outbreak has sickened over 17,000 people worldwide and killed over 360 at last count. This means its death rate remains at about 2 per cent compared to around 10 per cent during the 2003 Sars epidemic, though the Wuhan virus has sickened more people than Sars. Studies on how quickly it spreads remain inconclusive, with a commonly used measure - known as the basic reproduction number - being difficult to calculate.

The virus was first reported as a string of pneumonia-like cases in Wuhan in December, before the World Health Organization identified it in early January as a new strain of coronavirus. It has since spread to markets including Singapore, Malaysia, Taiwan, France, South Korea and Canada.

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