Following Brexit, CDLHT was sold down 4.1%  over two days to S$1.39 at the close of 27 Jun,  on news that it has exposure to the UK. It has since recovered to S$1.46 as of yesterday and is  trading at a forward FY16 yield of 7%. The  impact of Brexit on CDLHT’s UK asset, the Hilton  Cambridge City Centre (5.4% in terms of  portfolio valuation as of 31 Dec 2015), is  uncertain at this point in time. On one hand, UK  hotels face the risk of depressed corporate  demand should Brexit result in an economic  downturn.

Nonetheless we expect business  activity in Cambridge, which is largely driven by  life science companies, to be more resilient as  compared to that within London.

Furthermore,  with the weakened pound, the hotel may receive  strengthened demand from the leisure segment,  given Cambridge's reputation as a tourist  destination.

As of 1Q16, CDLHT does not provide  a breakdown of Cambridge’s revenue between  corporate and transient demand. Given the  Cambridge asset forms a small part of CDLHT's  portfolio and the uncertain implications of Brexit  on asset performance, we keep to our forecasts  for FY16.

Maintain HOLD on CDLHT with a fair  value of S$1.38.

Source: OCBC Research - 12 Jul 2016