CDL H-Trust – DBSV

More than meets the eye

• “Debunk” street’s view that CDL H’s portfolio RevPAR has been lagging industry peers in recent quarters

• Positive data points; we remain cautiously optimistic on prospects in 2012

• Maintain BUY and DDM-based TP of S$1.85

Not as bad as what street thinks. The recent stellar hotel performances from the two integrated resorts in 2Q/3Q 2011 have been eye catching. Contributing close to 9.8% of Singapore’s inventory, we believe these numbers could have skewed recently reported tourism statistics. Stripping out contributions from the two IRs, it is clear that CDL HT’s hotels operational data (in terms of occupancy levels, RevPAR) continue to remain above its industry peers rather than underperforming as thought previously by most on the street.

Corporate updates have been positive to-date. While the 2 IRs continue to attract occupancies of over 90%, even at above than industry’s room rates, we could potentially see hoteliers turn more confident about holding rates firm rather than drop rates going forward. With the potential spillover demand from the recent holiday season and an expected strong line-up of conferences and events, we estimate total visitors to continue growing at a rate of 4-7% y-o-y. Unlike an expected flattish industry performance, CDL HT is projected to deliver 0-5% y-o-y growth in RevPAR, leveraging on the recently completed refurbishment program (Orchard Hotel and Novotel Clarke Quay) and full year contribution from Studio M hotel.

Maintain BUY and DDM-based TP of S$1.85. We maintain our Buy rating in anticipation of potential earnings surprise, hinging on faster than expected recovery in the global economic environment. In addition, given its relatively low gearing of 26% and an implied yield of close to 5.7%, CDL HT stands ready to acquire hotel assets opportunistically which we believe will be accretive to unitholder distributions.