CDL H-Trust – CIMB

REVPAR growth beyond 2010

• In line; maintain Outperform; target price raised to S$2.20 (from S$2.01). 1Q10 results were broadly in line with Street and our expectations. DPU of 2.32cts (after deducting income retained for working capital) forms 21% of our full-year estimate and 22% of consensus, which we consider to be in line due to seasonal weakness. Revenue and DPU rose 18% yoy on maiden contributions from Australian hotels acquired in February, and a 16% increase in REVPAR from Singapore hotels. We believe the opening of Resorts World will change demand structurally, and increase our REVPAR assumptions for Singapore hotels for 2010-11. Our DPU estimates increase by 5-6% for FY11-12, while our DDM-based target price rises accordingly to S$2.20 from S$2.01 (discount rate 8.6%). CDLHT offers a prospective total return of 19.9% from potential price upside of 14% and forward dividend yields of 5.9%. We see catalysts from continued REVPAR growth beyond 2010.

• Singapore REVPAR up 16% yoy despite 1,350 new rooms from Resorts World. The increase in REVPAR came from a 9.5%-pt improvement in occupancy to 84.3%, and a modest 3% yoy increase in room rates. This was also the first qoq increase in average room rates since they started to decline in 3Q08. Occupancy was buoyed by higher visitor arrivals for the Singapore Airshow in February and International Furniture Fair in March. Visitor arrivals have been breaching records in the four consecutive months since Dec 09, following the opening of Resorts World Sentosa. Management guided that April REVPAR improved 38% for Singapore hotels, with improvements in traditionally-weak weekend occupancy. We believe occupancy and room rates for the rest of the year will continue to strengthen with the opening of Marina Bay Sands this month.

• Changes in assumptions. We increase our REVPAR assumptions for Singapore hotels by 11-14% (from 5%) for FY11-12 in the belief that structural changes in demand for weekend stay in Singapore hotels will sustain occupancy above 85%.