CDL H-Trust – Phillip

Below our expectation!

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.

• 3Q12 revenue $36.1mn, NPI $33.6mn, distributable income $26.3mn
  
• 3Q12 DPU of 2.72 cents
  
• Maintain Neutral with revised target price of S$1.970
  

What is the news?

Gross revenue and net property income came in at S$36.1mn (-0.8%y-y) and S$33.6mn (-1.1%y-y) respectively. The slump in top-line figures were because of the slowing global economies which undermined the financial and operational performances of its Singapore hotel portfolio. Currency translation loss from the weakening Australian dollar was also the cause of the fall. DPU was 2.72 cents in 3Q12 (2.77 cents in 3Q11), bringing 9-month DPU to 8.42 cents. This translates to 73%/70.8% of our FY12/consensus DPU estimates.

How do we view this?

3Q12 result was a disappointment. Even we expect higher DPU in the fourth quarter (driven principally by the F&B segment arising from the year-end festivities), CDL HT’s FY12 DPU is unlikely to meet our FY12 DPU estimate.

Investment Actions?

The prolonged slowdown in global economic conditions has caused companies to tighten their accommodation budget. In this regard, we believe hoteliers have less pricing power on the room rate moving forward. Company functions like meetings and conference business were also affected by the economic malaise and will continue to drag down CDLHT’s revenue. Hence, we adjust our top-line figures to better reflect the current market condition and lower our DPU estimates by 2.7% on average over FY12-FY16. We trim our price target to S$1.970 and maintain neutral given little upside based on the closing price of S$1.940.