CDL H-Trust – Lim and Tan

• CDLHT has, hardly surprisingly, acquired the Studio M Hotel from Millennium & Copthorne, for $154 mln ($156 mln including fees to be paid via issuance of new CDLHT units). (CEO Vincent Yeo had, in recent weeks, “hinted” of this possible transaction.)

• Studio M, which has 360 rooms and located in the Robertson Quay precinct, was completed only about a year ago.

• The acquisition is necessarily yield accretive, with net property yield of 6% based on the expected first year rent of $9.24 mln from M&C, which has been granted the master lease.

• On a pro-forma basis, DPU will rise 5% from 11.18 cents to 11.74 cents for a yield of almost 6% at $1.97.

• The acquisition is to be fully funded by debt given CDLHT’s debt headroom. Indeed, aggregate leverage will rise to a still comfortable 26.5% from 20.4%.

• We maintain BUY.