CDLHTrust – DBS
It keeps getting bigger and better
Latest acquisition creates location synergies: CDLHT recently acquired Novotel Clarke Quay for S$201m. The leasehold prime 25-storey hotel is located in the Clarke Quay area on top of the Liang Court Shopping Podium and has a land area of 12,925.4 sq m. Comprising 398 rooms, the property offers facilities such as an outdoor swimming pool, six food and beverage outlets, conference facilities, recreation facilities and 755 shared car park lots. The property recently completed a comprehensive renovation to key public areas, restaurants and all guest rooms. This is their second acquisition from third-party owners since their IPO. This acquisition helps them to become the biggest hotel landlord in Singapore, in terms of number of rooms. All five hotels in Singapore are actually within the same cluster area of Clarke Quay/ Havelock Road area which will create a clustering effect on the portfolio and synergistic effect on the room rates.
More hotels potentially injecting to the trusts: CDLHT has a pre-set agreement with M&C and CDL related groups that all the present and future development under their group in Singapore will all contain first right of refusal. Currently, Copthorne Orchid Hotel (440 rooms) is the only one that is in operation with this clause. Future developments under this agreement include the luxurious St Regis Singapore in Cuscaden Road (299 rooms, owned by CDL/Tid/Hong Leong Group, to be opened by end 2007) as well as a hotel in Mohammad Sultan Road (350 rooms, owned by M&C, to be opened in 2008). The two, together with Copthorne Orchid Hotel, will potentially add over 1,000 quality hotel rooms to their portfolio after 2 – 3 years of maturity.
Maintain Buy, Target Price S$2.40: The inclusion of the Novotel Clarke Quay will increase their market share in the Singapore hotel section. As the current hotel demand is outweighing supply, with upcoming mega events such as Formula 1 race in 2008 and the upcoming Integrated Resorts and conventions to further fuel the visitor arrival numbers, these should greatly benefit the hotel operators in Singapore. All the above news will contribute to the growth of the company and support our 15% y-o-y increase in hotel RevPAR for the portfolio. Maintain Buy, target price of S$2.40 at parity to our DCF calculation.