• 2Q10 revenue of $30.7 million, net property income of $28.7 million, distributable income of $24.1 million

• 2Q10 DPU of 2.57 cents, 1H10 distribution of 4.89 cents

• Maintain Hold, fair value of $1.93

CDL HT recorded 2Q10 revenue of $30.7 million (+51.9 % y-y, +15.4% q-q), net property income of $28.7 million (+49.2% y-y, +16.1% q-q) and distributable income of $24.1 million (+38.7% y-y, +11.6% q-q). $2.41 million was retained for 2Q10 and total income retained in 1H10 was $4.57 million. DPU for the 2Q10 was 2.57 cents (+36.0% y-y, +10.8% q-q). The trust will be paying out 4.89 cents for 1H10. The improved performance was on the back of sustained growth in the tourism sector as well as full quarter contribution from the Australia hotels (acquired in Feb 2010).

The Singapore portfolio experienced a strong performance. Revenue grew 32.7% from a year ago. Improved performance was seen across all the Singapore hotels. Occupancy for the Singapore hotels was 88.5%, up almost 14 percentage points from 1Q09 where the lowest was recorded during the recession. RevPar (Revenue per available room) also rebounded to $195. Revenue from the Orchard Hotel Shopping Arcade was flat, with occupancy rate held steady at 81%. The Australia properties contributed a full quarter revenue of $4.4 million while the New Zealand property accounted for $2.1 million. Percentage breakdown of the gross revenue is Singapore; 78.7%, Australia; 14.4%, New Zealand; 6.9%.

CDL HT raised gross proceeds of $200 million in a private placement earlier this month and $196.5 million was used to repay debt. It now has total debt of $326.4 million with gearing at 18.6%.

CDL HT has benefitted from the rebound in the tourism sector. Tourist arrivals continued to register double-digits growth from a year ago. The increase in tourist arrivals had translated into higher hotel occupancy and RevPar. CDL HT performance is very much in-line with the market statistics. For the 1H10, CDL HT is slightly ahead of the industry average with occupancy rate of 86.4% and RevPar of $185 against the industry’s occupancy and RevPar average of 85% and $174.

We continue to have an optimistic outlook on the tourism sector and think y-y growth will last through the year. We like CDL HT for its positioning in the sector and also its lightened balance sheet which will enable it to capitalize on acquisition opportunities. We adjusted our FY10E revenue and DPU up slight by 1% and 0.6% to reflect the positive outlook. However we think CDL HT is fairly value with the recent run-up in price and we are maintaining our Hold recommendation with fair value of $1.93.

More legs to run

• In line; maintain Outperform and DDM-based target price of S$2.04 (discount rate 8.6%). 2Q10 results were broadly in line with Street and our expectations as we anticipate a back-loaded 2H10. 2Q10 DPU of 2.57cts (after deducting income retained for working capital) forms 23% of our full-year estimate and 25% of consensus. 1H10 DPU of 4.89cts for distribution is also broadly in line (45%). With dividend yields compressed to 5.6%, we believe accretive acquisitions are impending with the likely target markets being Singapore, Japan, Vietnam and India. We also believe REVPAR could grow further and expect BTMICE to be the next propeller beyond 2010, providing stock catalysts.

• 45% REVPAR growth. 2Q10 DPU was up 35.7% yoy on sharp increases in both occupancy and average room rates in Singapore hotels. Occupancy at 88.5% (+13.1% pts yoy) and average room rates at S$220 (+23.6% yoy) lifted REVPAR to S$195 (+45.4% yoy). More significantly, the growth in 2Q10 room rates was 24% vs. +3% in 1Q10 as occupancy edged closer to 90%. Average room rates of S$220 were 14% shy of CDLHT’s last peak of S$255. Management shared that weekend occupancy, typically much weaker than weekday occupancy, had also swelled to the mid-80%, with weekday occupancy way over 90%.

• BTMICE to spur next leg of growth. While increased corporate and leisure travel has boosted REVPAR substantially, we believe there is room for further organic growth, which should come from the BTMICE segment from 2011. Typically, event and convention organisers delay forward bookings until they have sighted convention venues. We believe forward bookings will ramp up as both Marina Bay Sands and Resort Worlds gradually open up their remaining sections over 2010-11. With anecdotal occupancy of hotels in both resorts at market levels, there should be good spillover demand for CDLHT’s hotels.

CDLHT Q2 distributable income rises 38.7%

CDL Hospitality Trusts (CDLHT) posted a stronger set of results for the second quarter ended June 30, 2010 as hospitality performance improved across its portfolio.

CDLHT – which comprises CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust – registered a 38.7 per cent year-on-year increase in income available for distribution to $24.1 million for Q2 2010.

Gross revenue was up 51.9 per cent to $30.7 million for the second quarter while net property income rose 49.2 per cent to $28.7 million.

Income to be distributed per stapled security is 2.57 cents, versus 1.89 cents in Q2 2009.

For H1 2010, CDLHT’s income available for distribution was $45.7 million, up 28.6 per cent year on year while gross revenue rose 34.1 per cent to $57.3 million, on the back of improved hospitality performance across the portfolio and contribution from recently acquired hotels in Australia.

With Singapore’s tourism industry continuing to see strong growth momentum, average occupancy at its Singapore hotels jumped 13.1 percentage points to 88.5 per cent for Q2 2010 while average daily rate rose 23.6 per cent to $220.

Revenue per available room surged 45.4 per cent during the quarter to $195.

With additional attractions to open at the two integrated resorts and upcoming events such as the Formula One Singapore Grand Prix, CDLHT expects to benefit from the anticipated increase in demand for hotel rooms.

The trust owns five hotels in Singapore and Orchard Hotel Shopping Arcade. It also owns five hotels in Australia, which it acquired in February this year, and a hotel in New Zealand.

Vincent Yeo, CEO of M&C REIT Management, the manager of H-REIT, said: ‘CDLHT experienced a very robust second quarter with the growth momentum of our Singapore hotels’ performance accelerating compared to the first quarter.’

Having raised $200 million on July 1 through a private placement – which helped to reduce gearing to 18.6 per cent – and with its recently announced $1 billion multicurrency medium-term note programme (through a wholly owned subsidiary), CDLHT is in a better position ‘to capitalise on acquisition opportunities’. It is eyeing markets such as India, Japan as well as Singapore.

‘Studio M hotel (in Singapore) could be its top acquisition choice given the shorter-than-expected gestation of Studio M; with occupancy over 90 per cent and average room rate of $170,’ DMG Research suggested in a report yesterday.

DMG maintained a target price of $2.30, highlighting that acquisitions would likely boost longer-term DPU growth potential.

The counter closed six cents higher in trading yesterday at $2.