CDL Hospitality Trust
Still on track
Arrivals touched a record 1.2m for the month of Apr. Yoy growth was commendable at 9%,albeit lower than previous months’ 13-16%.Upscaleand mid-tier hotels sustained their performances, and CDLHT should be a beneficiary.
We keep our DPU estimates, DDM target price(discount rate: 8.1%) and Outperform rating. We see catalysts from higher-than-expected REVPAR and accretive debt-funded AEI and acquisitions, backed by balance-sheet strength and retained earnings.
Tourist arrivals in Singapore were a record 1.2m for the month of Apr. Yoy growth was commendable at 9% albeit lower than previous months’ 13-16%. Apr’s growth was led once again by Asian travellers and likely the bi-annual Food & Hotels Asia fair in the month. REVPAR grew 10% yoy to S$226.40/day, the result of stronger occupancy (+1% pt) and ARR (+9% yoy), particularly for up scale hotels.
What We Think
We estimate visitor arrivals of 14.1m (+7% yoy) and REVPAR growth of 6%yoy for 2012;there could be upside with more events and attractions in store for the year. International Cruise Terminal had commenced operations in late May while CommunicAsia and the opening of Gardens by the Bay should contribute in Jun.
The performance of upscale hotels was strong, with consistently high occupancy of 90% and above-peers ARR growth. REVPAR for mid-tier hotels was up 1% yoy, where ARR growth took up some slack from lower occupancy. On this basis, we think CDLHT should perform well, with most of its hotels operating in these tiers.
What You Should Do
Stock is up more than 20% YTD. While not exactly cheap at 1.2x P/BV, it still trades below its long-term average of 1.3x P/BV. Conditions remain conducive for outperformance given tight room supply of 3.1% of existing stock.Low leverage of 26% also leaves room for accretive AEI and acquisitions. We see catalysts from higher-than-expected REVPAR and accretive debt-funded AEI and acquisitions.
Publish date: 14/06/12