CDL H-Trust – OCBC


Doubling GDP contribution

Quality tourists and high-end hotels

Slower supply growth for high-end hotels

Growing influence of hospitality

We think it is notable that the Singapore Tourism Board (STB) is targeting a possible doubling of tourism’s GDP contribution to 8%. In 2011, tourism accounted for 4.1% of GDP, substantially higher than the 3.6% in 2010 and 2.4% in 2009. In 1Q12, real GDP grew 1.6% YoY while the Accommodation & Food Services sector (a rough proxy for tourism) grew faster at 4% YoY. For 2012, STB is aiming for S$23-24b in tourism receipts, implying a 3.6-8.1% YoY increase. The target growth rate, which STB has indicated could be revised upwards, is significantly higher than the official 2012 GDP growth forecast of 1-3% and highlights the increasing importance of tourism.

Stronger performance for high-end hotels

The STB has recently highlighted that it wants to focus on attracting quality tourists who spend more, as opposed to simply trying to grow the absolute number of tourists. This emphasis will probably continue to benefit high-end hotel players like CDLHT. For 1Q12, tourist arrivals jumped 14.6% YoY to 3.5m. Based on preliminary figures, high-end Singapore hotels showed RevPAR growth of 14.5% in 1Q12, outperforming budget hotels (+5.5% YoY). The robust RevPAR growth for high-end hotels was supported by larger increases in rental rates. We believe that our 7.5% RevPAR growth rate assumption for CDLHT’s Singapore hotels in 2012 is not aggressive.

Favorable supply dynamics for high-end hotels

Updating our in-house hotel database, we forecast that overall hotel room supply will increase by 3.7% p.a. for 2012-2015, comfortably outstripped by hotel room demand growth of 6.4% p.a. High-end hotel room supply will grow by 3.0% p.a., slower than the 5.3% p.a. for budget hotels. The temporary closing of Pan Pacific Singapore for renovations from Apr to Aug has also taken 778 high-end rooms off the market.

Maintain BUY

We maintain our BUY rating on CDLHT and our RNAV-derived fair value estimate of S$2.04.

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