What is the news?

CDL HT posted an all-time high DPU of 11.32 cents for FY12. The y-y DPU increase of 2.4% was due to the full year contribution from Studio M hotel and better overall hospitality performance in FY12 as evidenced by the record high RevPAR (S$211). The full year’s variable income from the Australia properties also attributed to the higher DPU. The portfolio asset was revalued at S$2,044.9mn and recognized revaluation gains of 0.7% compared to last year.

How do we view this?

FY12 DPU was in-line with our estimates of 11.31 cents. Despite registering a record DPU in FY12, CDL HT went through a rough patch especially during the second half of previous year. Judging from the firmed recovery in US and China and the recent positive market sentiment in the global stock market, it is still premature to say that Singapore hospitality market is able to ride on the wave.

Investment Actions?

We fine-tuned our assumptions and rolled over our estimates to FY13 and included FY17 to our model. With the adjustments, our price target improved from S$2.060 to S$2.130. On valuation ground, it should warrant an accumulate call but the challenging hospitality outlook hold us back to re-rate the stock at this point in time. We will keep a close watch on the hospitality sector for the possible re-rating when more positive data stream in. Investors can hold on to the share as the DPU is expected to increase from the acquisition of Angsana Velavaru, Maldives which is understood to be completed in end of January.

Source: PhillipCapital Research - 31 Jan 2013