CDL – BNP
CDL REITS, bnp remains a BUY with target price $2.28
– CDREIT, a BNPP Top Buy, will benefit from Singapore’s rising room rates over the next few years, driven by strong growth in tourist numbers but a limited supply of new hotel rooms. It plans to double its SGD846m portfolio over the next three years We maintain our BUY rating on this scarcely-covered stock, with a TP of SGD2.28.
– Robust 1QFY07 earnings growth . CDREIT posted a 37.8% increase in net property income of SGD16.7m in 1Q07. DPU was SGD0.0175 with an annualised yield of 3.8%. Overall occupancy rose from 78% in 1Q06 to 84% in 1Q07, while RevPAR rose 25.4% from SGD122 (ADR SGD157) to SGD153 (ADR SGD182) over the same period.
– Bold acquisition plans to drive DPU growth . CDREIT has a strong sponsor (Millennium and Copthorne) with a portfolio of 101 hotels globally. The management plans to double its existing portfolio (SGD846m) within the next three years, and intends to concentrate its acquisition efforts in the Asia Pacific and Middle East regions. We are confident that the management’s aggressive acquisition targets will underpin continual increases in DPU.
– Dynamic pricing underpinned by rising demand . Against the background of an improving tourism market, we believe stocks with leveraged plays in this segment could see further re-ratings in valuations, underpinned by higher RevPARs. The dynamics of revenue contribution in the hospitality segment are generally robust, considering that hotel operators respond very quickly to surging demand with higher room rates.
– Ascendant revision in hotel rates to drive DPU growth . CDREIT’s strong operating trends will continue to feed through to 2008. New supply of rooms are likely to be limited to only 2% in 2007 and 6% in 2008, with visitors growth estimated to grow by between 6-7% annually. We expect the ascendant revision in hotel rates to continue to drive DPU growth. Maintain BUY with a target price of SGD2.28.