ART – CIMB

Full year in line

• Results in line; maintain Neutral. FY09 results met Street and our expectations (101% of our estimate). Changes in our assumptions, reflecting contributions from asset-enhancement initiatives and more positive REVPAU growth, raise our FY10-11 DPU estimates by 3%. We also introduce FY12 estimates. Following our upgrade, our DDM-based target price rises to S$1.35 from S$1.21 (discount rate 8.3%). We see re-rating catalysts from accretive acquisition announcements.

• FY09 DPU of 7.32cts (CIMB-GK: 7.28cts). 4Q09 and full-year DPU numbers were in line with Street and our expectations. Distributable profit of S$45.2m and DPU of 7.32cts were up 15% and 16% respectively. Full-year gross profit of S$84.6m was down 11% yoy as occupancy and daily rates weakened.

• Portfolio REVPAU down 16% in 2009, to S$122. However, the qoq decline in 4Q09 was much more muted at -7%. The declines were led by Singapore (-33%) and China (-26%). Average length of stay remained stable at seven months.

• Asset enhancement in Singapore and Vietnam. Management has commenced and will continue with the asset enhancement of three assets: Somerset Liang Court (Singapore), Somerset Grand Cairnhill (Singapore) and Somerset Grand Hanoi (Vietnam). Management anticipates 5% and 9% cap rates for its Singapore and Vietnam asset-enhancement works respectively. Some 514 apartment units will be refreshed at an estimated cost of S$24.5m. Completion is expected in 2011. The cost will be funded by operating cash flow and existing bank facilities. As the refurbishment will be carried out in phases, and newly completed units will be priced higher, management anticipates a marginal impact on distribution.

• Sentiment turning positive. Management remains cautiously optimistic on 2010, and guides for moderate yoy growth. Acquisitions are likely to resume this year.