CDLHTrust – DBSVickers

Call for Capital

New share issue: CDLHT is issuing 130m new shares in two tranches: 1) A non-renounceable preferential offering to Singapore-registered security holders on 3 for 20 basis; and 2) A private placement to institutional and other investors. The issue price is expected to be close to 10% discount to the weighted average price for trades done for the day the placement agreement is signed. The purpose is to repay certain existing debts and for general corporate and working capital. It will also help to lower the gearing ratio, providing the REIT flexibility to make further yield accretive acquisitions.

Maintain Buy, TP S$2.81: We assume the pricing for the new tranches to be at S$2.20 per share, translating to a potential increase in capital of S$286m. This will help to offset the capital for the Novotel Clarke Quay purchases of S$201m and some other outstanding debts. The capital call will also lower their gearing. We remain positive on the stock as current hotel demand outweighs supply plus the upcoming mega projects and events will help sustain visitor arrival growth. We have raised our forecast for Singapore hotel rates to increase at a 18% y-o-y from 2007 to 2012 for RevPAR under their portfolio. Maintain Buy, target price increased to S$2.81 at parity to our DCF calculation based on fully diluted basis. This is the best stock within the property sector with the highest exposure and benefits the most from the tourism sector’s upturn.