CDLHTrust – CIMB
On track
• On track. 1Q09 results are in line with consensus and our expectations. DPU of 1.97cts forms 26% of our forecast for FY09 and was up 10% qoq (one-off expenses in 4Q08 for additional property tax with respect to 2006-07 and one-off MCST fees paid to Liang Court Complex). Net property income of S$20.6m declined 21.2% yoy, in line with falling tourist arrivals in Singapore and weakening demand for hotel accommodation.
• REVPAR down 20%. CDLHT’s Singapore portfolio occupancy hit a record low of 74.8%, down 8.9% pts from 4Q08. Revenue per available room (REVPAR) declined 20.2% qoq.
• Refinancing in the bag. CDLHT has secured a 3-year S$350m facility from DBS Bank to refinance all its S$297m debt due in Jul 09. This is made up of a S$270m term loan and a S$80m committed revolving credit facility. Based on the announced interest margin of 2.6% p.a., we estimate all-in cost of debt of 4.3%, below our assumption of 4.5%. The facility is secured on all of CDLHT’s five Singapore properties. Separately, CDLHT has another S$300m uncommitted multi-currency unsecured bridging loan facility, also with DBS. After the refinancing, asset leverage will be 19.7%.
• Maintain Outperform and DDM-based target price of S$0.68. The rest of 2009 would be difficult for CDLHT if visitor arrivals, which have been declining in the past 10 months, worsened. Although the rate of decline had slowed in Mar 08, more downside is possible if swine flu escalates into an epidemic. Nonetheless, we draw comfort that: 1) CDLHT’s properties are operated by seasoned hotel players; 2) management is working closely with the operators to drive revenue and contain cost; 3) there are no refinancing issues till 2012; and 4) Singapore’s experience with SARS has resulted in more precautionary measures in place. Thus, swine flu may not be as great a threat as feared. In the event of a further occupancy decline, CDLHT remains protected by its fixed rent component, which we estimate would translate into a DPU of 3.42cts, assuming a 90% payout (see report dated 27 Mar 09). Based on the last closing price of S$0.58, this would be a yield of 5.9%. Maintain target price of S$0.68 (discount 10.8%), still based on DDM valuation.