CDL – DBS
CDL REITS, DBS remains a BUY with target price $2.20
– Revenue was in line, net investment income was slightly above our expectations due to higher occupancy levels. The 1Q07 gross revenue registered at S$18m and net property income hit S$16.7m, both 30% and 32% above the proforma numbers. The portfolio enjoyed higher occupancies (from 82% to 84%) and higher weighted average room rate (S$182 vs S$162) than the proforma numbers with RevPAR increasing from S$132 to S$153, an increase of 16%. The New Zealand property enjoyed occupancy of 78% at an average daily rate of NZ$142 and RevPAR of NZ$111. The DPU for the quarter hit 1.75cents, or an annualised rate of 7.1cents, 27.7% above the proforma forecast.
– The outlook for the hotel market continues to be strong with tight supply situation in Singapore and high demand from both business and leisure travellers. Singapore Tourism Board (STB) expects number of visitor arrivals growing at a CAGR of 6.4% from 2006 to 2015. On the supply front, the addition of 2,849 rooms by the end of 2008 may be inadequate in the face of robust demand. In New Zealand, the Ministry of Tourism said growth would be at 4.9% y-o-y and rising to 59.8 mn in 2012, underpinned by increased exposure of New Zealand as a tourist destination. We expect growth of 15% in room rates in Singapore for 2007. Further growth is also expected through CDL REIT’s expansion plans locally as well as overseas, especially in high-growth countries like China, India, Vietnam and the United Arab Emirates. The group plans to increase contribution of overseas contribution from 10% currently to 40%.
– With the potential asset injection from parent M&C or via third-party acquisitions, as well as the continued increase in business travel volume to Singapore and around the region, we remain positive on CDREIT. Maintain BUY with no change in assumption and TP of S$2.20 backed by DCF calculation.