Towards Financial Freedom
CDL Hospitality Trusts - Stable growth going forward
2Q12 DPU inline with expectations. CDL Hospitality Trust (CDL-HT) reported 2Q12 DPU of 2.92S'' (-1.4% YoY) equivalent to 24.5% of our FY12 DPU estimate. The marginal drop in DPU is mainly due to the lack of a one off property tax refund recognised in 2Q11. Stripping the previous property tax refund, 2Q12 DPU grew by a respectable 10.2% YoY. Gross revenue and RevPAR came in at S$36.6m (+6.0% YoY) and S$217.0 (+5.9% YoY) respectively, on the back of strong growth in visitor arrivals of 12.3% for the first 5 months of 2012 and a full quarter's revenue contribution from Studio M Hotel. In the subsequent quarters, we expect CDL-HT to continue to register stable numbers on the back of 1) continual growth in Singapore's tourism; 2) demand continues to outstrip supply of new hotels and 3) RevPARto remain strong in 2012. Given the bright prospect in the tourism industryof Singapore, we maintain our BUY call on CDL-HT with a DDM based (COE: 8.6%, terminal growth: 2.0%) TP of S$2.20. CDL-HT currently offers a forecasted FY12/13 yield of 6.2% and 7.0%; while trading at 4.6% spread vs the pre-crisis mean of 2.6%, our TP represents a spread of 4.2%.
Respectable results from organic growth and Studio M Hotel. During 2Q12, although CDL-HT experienced a growth of 5.9% YoY in NPI, this growth is mainly attributable to Orchard Hotel Shopping Arcade and the newly acquired Studio M Hotel. Stripping these two items, NPI for the remaining 4 hotels grew at a lower rate of c.4% (after stripping the one-off property tax refund). This is possibly a result of lower corporate spending amid concerns over the European debt crisis during 2Q12. However, going forward, we expect CDL-HT to be able to grow steadily on the back of stable local corporate spending on events coupled with the strong growth in Singapore tourism.
Much headroom for future acquisition. Currently, with a low gearing ratio of 25.2% and an internal maximum gearing rate of 40% (which translates to an additional S$313m of debt the trust can take on), there is much room for CDLHT to undertake future acquisitions. Currently, management indicated that they are actively seeking for possibleacquisitions in stable markets such as Japan and Australia.
Continues to remain strong. As tourism in Singapore continues to remain robust, together with the impeccable management skills of CDL-HT and the ability to tap on potential pipeline of assets from both M&C and CDL, we expect CDL-HT's performance will continue to remain solid. Given limited additional hotel supply in the coming years together with a growing range of new attractions and strong event calendar in 2012, CDL-HT is well positioned to benefit from this stable demand.
Source: OSK
Respectable results from organic growth and Studio M Hotel. During 2Q12, although CDL-HT experienced a growth of 5.9% YoY in NPI, this growth is mainly attributable to Orchard Hotel Shopping Arcade and the newly acquired Studio M Hotel. Stripping these two items, NPI for the remaining 4 hotels grew at a lower rate of c.4% (after stripping the one-off property tax refund). This is possibly a result of lower corporate spending amid concerns over the European debt crisis during 2Q12. However, going forward, we expect CDL-HT to be able to grow steadily on the back of stable local corporate spending on events coupled with the strong growth in Singapore tourism.
Much headroom for future acquisition. Currently, with a low gearing ratio of 25.2% and an internal maximum gearing rate of 40% (which translates to an additional S$313m of debt the trust can take on), there is much room for CDLHT to undertake future acquisitions. Currently, management indicated that they are actively seeking for possibleacquisitions in stable markets such as Japan and Australia.
Continues to remain strong. As tourism in Singapore continues to remain robust, together with the impeccable management skills of CDL-HT and the ability to tap on potential pipeline of assets from both M&C and CDL, we expect CDL-HT's performance will continue to remain solid. Given limited additional hotel supply in the coming years together with a growing range of new attractions and strong event calendar in 2012, CDL-HT is well positioned to benefit from this stable demand.
Source: OSK
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