CDL H-Trust – DBSV

Marching forward

• April tourism data point to a potential record breaking 2Q12 performance for hoteliers

• RevPAR growth momentum continues as hoteliers price room rates higher

• CDL HT (BUY, TP raised to S$2.06) and GENS (S$2.05) offer the best exposure into the industry

Visitor arrivals hit another high in April 12. Latest data from the Singapore Tourism Board (STB) for April12 provides us with a glimpse of how 2Q12 hospitality numbers could turn out. Tourism arrivals in April 12 remained high at 1.2m visitors (+9% y-o-y), a new record. YTD visitor arrivals have hit 4.8m, representing 33% of STB’s higher end target of 13.5-14.5m for 2012. With the industry approaching the seasonally high tourism season of June-July, we are optimistic that the industry could potentially exceed the projections set by STB.

RevPAR hits new high in April, growth momentum picks up. The strong visitor numbers, fueled by major MICE events like Food & Hotel Asia held in April 12, have led to strong demand for rooms, and thus room rates have remained on a firm uptrend on a q-o-q basis. Hotel performance remains robust, with occupancies hovering at a high of c87%. Average room rates at S$261/night, translating to a RevPAR of c.S$227/night, represent a 12% y-o-y jump, surpassing the S$216/night.

We expect hoteliers to report sequentially stronger RevPAR in the coming quarters. Hospitality data should continue to remain robust given the expected strong lineup of MICE events in the coming months (eg.CommunicAsia 2012 to be held from 19-22nd June, F1 race in September12) and the seasonally peak tourist holiday season in June-July. In addition, supply is expected to remain tight, especially in the core city area given the closure of Pan Pacific Singapore (790 rooms, representing close to 1.5% of total room supply in Singapore) for renovations and is expected to re-open only in September12 in time for the Formula one race.

Stock picks. We continue to like CDL Hospitality Trust (BUY, TP raised to S$2.06 as we roll forward numbers to 2013), given its leverage into the robust tourism sector in Singapore. The stock offers FY13-14F yields of close to 6.1 – 6.5%. GENS (BUY, TP S$2.05) should also benefit from expected stronger visitation at Resorts World @ Sentosa during the coming holiday season.