CDL H-Trust – CIMB

Acquisition in the near horizon

• Maintain Outperform, target price reduced to S$2.04 (from S$2.20). Recent tourism data points on occupancy and room rates, reinforced our positive view on the hospitality sector in 2010. We factor in dilution from CDLHT’s recent private placement and see DPU fall 5-7% in FY10-12. Our DDM target price falls accordingly to S$2.04 (from S$2.20), our reduced DPU forecast of 10.8cts for FY10 representing a 6.1% yield for CDLHT. Despite our lower target price, we remain positive on the company as we believe the strengthened balance sheet points to acquisition on the near horizon. Other stock catalyst could include a better than expected performance at its 2Q results to be released at end July, and refinancing on more favourable terms.

• Boom time for Singapore hotels. Singapore saw its 6th consecutive month of record visitor arrivals. Y-o-y, REVPAR rose 53.5% in May boosted by a 17%-pt rise in occupancy to 85% and a 13.6% increase in room rates island-wide. We believe that mega events in 2H10 will enable hotels to raise rates further in the year. Management commented that its Singapore hotels’ portfolio occupancy levels are also nearing the last peak of 89% in 2007/2008.