CDL H-Trust – Phillip

Positive on hospitality market

Company Overview

CDL HT is a stapled group comprising both REIT and Business Trust structures. Its mandate is to invest in a diversified portfolio of income-producing real estate which is primarily used for hospitality and/or hospitality related purpose.

• 1Q12 revenue $38.4mn, NPI $36.0mn, distributable income $26.9mn

• 1Q12 DPU of 2.78 cents

• Raise FY14-16 DPU estimates by 5.6%-6.0%

• Maintain Accumulate with target price increased to S$2.000

What is the news?

CDL HT delivered a set of remarkable performance, registering the highest recorded 1Q RevPAR of S$213 since the inception of CDL HT, partly due to a record high occupancy of 88.5%. Gross revenue and net property

income came in at 19% and above to $38.4mn and $36.0mn respectively in 1Q12. The double-digit jump was mainly attributable to the absence of Studio M Hotel in 1Q11 and higher receipt of variable income from the Australia Hotels. DPU gained 16.8% y-y to 2.78 cents, owing to the 17.7% rise in distributable income after deducting the retained income. This implied 24.1% of our FY12 DPU estimates.

How do we view this?

1Q DPU was broadly in-line with our expectation despite not being able to achieve a quarter of our FY12 DPU estimates. As we believe the already high RevPAR will continue to gain traction for the subsequent quarters, with tourism hot spots such as Garden by the Bay (Phase 1), the River Safari, and the Marine Park at Resorts World Sentosa opening in the rest of 2012. These new attractions are expected to draw more visitor arrivals barring any negative major events.

Investment Actions?

The positive outlook has prompted us to raise FY14-16 DPU estimates by 5.6%-6.0%. This lifted our price target to $2.00 but no change our Accumulate call.