CDL H-Trust – CIMB

Ending on a high

4Q11REVPARwas a record for the fourth quarter.Backed by a transformed tourism landscape, a larger dependenceon Asian travellers and resilient Asian consumption, we expect arrivals and REVPAR to hold upin 2012, despite headwinds.

4Q/FY11 DPU meets consensus and our forecasts, at 26/97% of our FY11. The slight miss in the full-year figure was due to higher retained income. We keep our DPUs and DDM target price (disc. rate: 8.6%) pending an analysts’ briefing, and introduce FY14 numbers. Maintain OP.

Ball still in hoteliers’ court

We are still expecting 3-5% growth in arrivals which should keep hotel occupancy at 84-86%, given a moderate 4% expected increase in rooms this year, which should allow hoteliers to raise rates. 4Q11 REVPAR of S$205 was its highest for 4Q (+6.0%), mainly on room-rate increases (+7.7%) to S$232, though occupancy dipped 1.4% pts yoy to 88.6%. Qoq performance was boosted by a return of rooms after the completion of upgrading work at Orchard Hotel, its largest asset.

Strong balance sheet

Asset leverage dipped to 25.3% from 26.5% on asset revaluations across its local and Australian properties. This positions it for debt-funded acquisitions and AEI. Management has remained prudent in retaining a larger portion of income (10% vs. 9% in FY10) to fund capex and working capital.

Trading below long-term average

While the stock has been re-rated by 16% since our last note in Dec 11, stock is still trading at 1.1x P/BV vs. its long-term average of 1.3x. Book valuations of about S$600k per room key for its local properties do not appear excessive especially when benchmarked against that of S$900k per room key for some market transactions.