CDL H-Trust – CIMB
Worst should be over
• DPU in line. 2Q09 results were in line with our expectations but exceeded consensus. Payout to unitholders is 90%, at S$15.8m. This translates to a DPU of 1.89cts, or 21% of our full-year forecast. 1H09 DPU amounts to 3.86cts, or 49% of our full-year forecast, which assumes a 90% payout. Actual DPU available for distribution based on a 100% payout for 1H09 is 4.25cts, 54% of our FY09 forecast.
• Room rates down 30% yoy; occupancy down 12% pts yoy. CDLHT’s Singapore portfolio occupancy was 75.5% (-12% pts yoy), recovering moderately (+1%) from the last quarter. This was despite more difficult operating conditions with cancellations and meetings held back due to H1N1. Average room rate for the Singapore portfolio was down to S$178 (-30% yoy). However, this fall is measured against 2Q08, CDLHT’s strongest quarter since its listing.
• More surprises in the bag. Management revealed that July’s occupancy had risen above 80% in Singapore, in line with industry performance. This is a positive start to 2H09. We are expecting more events such as the F1 night race, the continuance of the APEC Conference 2009 till November, and the return of bookings for conferences and meetings postponed by H1N1. We expect more upside surprises from: 1) possibly reduced interest cost as loans could be refinanced at lower margins; 2) a return of payout to 100% as early as 2H09 if conditions continue to improve; and 3) room rates priced on a daily basis.
• Maintain Outperform; DDM-based target price raised to S$1.41 (from S$0.99). CDLHT’s performance has met our above-consensus estimates despite difficult conditions. We are positive that it is out of the woods. Hence, we revise our assumptions for: 1) full-year average occupancy to 75-85% (from 70-80%); and 2) average room rate up by 15% in 2010, from +3%. We maintain our 90% payout assumption. Our DPU forecasts increase by 4-11% following the changes in our assumptions. Our target price rises accordingly to S$1.41 (discount rate 9.1%), offering 19% potential price upside and forward yields of 7%. We believe CDLHT will be one of the key beneficiaries of integrated resorts opening in 2010.