CDL H-Trust – CIMB

Decent 4Q but muted guidance

Performance was decent amidst headwinds from weaker corporate travels. Given the upcoming room supply and tighter corporate travel budgets, management guidance remains fairly muted. We see little room for outperformance at current levels.

4Q/FY12 DPUs were slightly below street and our estimates, forming 26/98% of our FY12 forecast. The slight deviation came from higher interest costs as operating performance was in line. We cut DPUs on higher interest cost assumptions, hence our lower DDM-based target price (discount rate: 8.1%). Maintain Neutral.

Decent performance amidst headwinds

4Q12 DPU (still on unchanged 90% payout) was down 1% yoy. NPI was flat yoy as stronger performance from Grand Copthorne Waterfront, Novotel Clarke Quay and its New Zealand asset offset yoy declines on its other assets. Local assets were hit by weaker corporate travels, while fixed rents from Australian assets suffered translation loss arising from the weaker A$. Locally, RevPAR was flat as stronger occupancy (+0.8% pts yoy to 89.4%) offset weaker ARR (-1.3% yoy to S$229/day).

Muted guidance

Management guidance was fairly muted, given concerns over tighter corporate travel budgets and room supply (+8%) in 2013. For 1Q13, management expects performance to be affected by the absence of the bi-annual Singapore Air-show and a later Chinese New Year this year, which could affect the momentum in Feb. So far, RevPAR growth is in line at 1% yoy for the first 27 days of 2013 (note the earlier Chinese New Year in Jan 2012). Corporate renewal rates have thus far been lifted by an average of 2-5% yoy.

Maintain Neutral

Valuations are not overly demanding at 6% yield and 1.2x P/BV. However, we maintain Neutral in view of the muted local organic growth outlook. We will turn more positive on signs of improved acquisition momentum and a turnaround in the local hospitality outlook.