CDL H-Trust – DBSV

Earnings growth momentum to continue

Robust prospects for Singapore tourism in 2012

Positive data points for CDL HT

BUY, TP adjusted slightly to S$1.99 based on DDM

Singapore – a destination like no other. The value proposition in Singapore’s tourism sector has greatly changed (with the opening of the two integrated resorts, Universal Studios and various shopping destinations) since 2009. Before that, most of the country’s key attractions had not yet opened. Singapore’s main visitor market source remains largely within the Asia-Pacific region (contributing close to 88% of total visitors in 2011 vs 85% in 2010), enabling the country to leverage on the strong intra-regional demand for leisure and business travel. With a slew of new attractions and a strong line-up of MICE events in the coming months, we expect Singapore to remain one of the hot destinations to visit in 2012.

Strong demand for accommodations, from MICE, to benefit CDL HT in 2012. We anticipate strong demand from the MICE sector, with a strong line-up of events in the coming quarters. In addition, the peak tourist periods of 2Q-3Q are fast approaching, and with the annual school holidays and the Formula One race in September, we expect CDL Hospitality Trusts (CDL HT) to continue to deliver sustained earnings growth on a q-o-q and y-o-y basis, fueled by the already high average occupancies of close to c.90%.

Any acquisition will be an upside surprise. CDLHT’s low gearing of 26% gives them debt-funded headroom to acquire. If any is made, this will be an earnings upside surprise as we, and the market, have not factored in any numbers.

BUY, TP raised slightly to S$1.99. While the stock has been re-rated close to c.5% after our recent upgrade, we remain optimistic given the strong underlying fundamentals for the hotel sector in the coming quarters. With an attractive FY12-13F yield of close to 7%, we maintain our BUY call with TP revised slightly as we raised our RevPAR assumptions slightly in the forward years.

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