CDL H-Trust – Phillip

1QFY10 Results

• 1Q10 revenue of $26.6 million, net property income of $24.7 million, distributable income of $21.6 million

• 1Q10 DPU OF 2.32 cents

• Maintain Hold, fair value of $1.96

Strong growth

CDL HT continued to register strong growth in 1Q10. It recorded 1Q10 revenue of $26.6 million (+18.1% y-y, +1.7% q-q), net property income of $24.7 million (+20.3% y-y, -0.1% q-q) and distributable income of $21.6 million (+18.9% y-y, -0.3% q-q). The trust retained $2.16 million from the distributable income and 1Q10 DPU was 2.32 cents (+17.8% y-y, -13.1% qq). Occupancy for the Singapore hotels was 84.3%, an improvement of almost 10% points from 1Q09. The q-q drop in occupancy can be attributed to the seasonal factor of the tourism sector as the peak season tends to be in the later half of the year. However we are also concern that the drop may be due to increased competition from the new supply of hotel rooms. RevPar improved 16% to $174, the highest over the last five quarters. Besides improvements in the hotel growth drivers, contributions from the recently acquired five Australia hotels accounted for approximately half of the y-y growth in revenue. Even the retail space that CDL HT owns is showing signs of a turnaround. Occupancy for the Orchard Hotel Shopping Arcade was flat at 81.5%, however average monthly rent increased 4% from $7.35 to $7.64 per month. Revenue contributions from Singapore, New Zealand and Australia are 84.5%, 8.1% and 7.4% respectively.

CDL HT has total debt of $546.3 million with gearing at 30.9%. $234.3 million is due in 2011.

The results of CDL HT reflect the improving tourism sector. The Singapore Tourism Board has a forecast of 11.5-12.5 million tourist arrivals for 2010, a 19-29% increase over 2009. In the first 3 months of 2010, tourist arrivals showed double-digit % growth. Hotel room occupancy held up well above the 80% mark. RevPar showed positive y-y growth for the, a vast improvement over the whole of 2009 whereby every month showed a y-y drop. With the infrastructure in placed and the line-up of events, we are optimistic that the official forecast should not be hard to achieve, barring external shocks.

CDL HT occupancy and RevPar compare well against the industry average. CDL HT occupancy of 84% is in-line with the industry average of 83% and RevPar is 6.1% above industry average of $164. As mentioned earlier, we are slightly wary of the competition from the new supply of hotel rooms. As we take a closer scrutiny on the tourist arrivals number, 1Q10 registered 2.693 million visitors, a slight increase over 4Q09 arrivals of 2.646 million, however CDL HT occupancy dropped 4.5% from 88.9% in 4Q09 to 84.3% in 1Q10. We are keeping our Hold recommendation and fair value of $1.96.