Category: CDL H-Trust

 

Hospitality REITs – UOBKH

Hospitality REITs – Where’s The Cream?

Hospitality, a mixed segment. Amongst the hospitality REITs which is represented by three stocks, CDL Hospitality Trust (CDREIT) provides a proxy to the tourism play, Ascott Residence Trust (ART) to the serviced residence segment, and First REIT (FIRT) to the healthcare industry. In comparison, CDREIT is very much Singapore-focused while the latter two offers a more regional exposure.

Remaking of Singapore main catalyst. Remaking of Singapore as a global city and ‘hub of hubs’ has brought about tremendous benefits to the hospitality industry and the hospitality REITs benefit in the following ways:

a) CDREIT – The tourism story in Singapore is well-known following the construction of IRs and the license to hold the Formula One Grand Prix. Hotels are set to benefit from the increase in visitor arrivals and room rates should rise in view of the short term limited supply of hotel rooms.

b) ART – Business and financial hub status of Singapore and growth of other Asian cities will spur demand for serviced apartments for expatriates and professionals. Globalization is a key factor in demand for serviced apartments in strategic locations worldwide. ART offers a regional exposure with assets in strategic locations.

c) First REIT – Beneficiary of medical tourism and Singapore as a healthcare hub with exposure to Indonesia and Singapore. First REIT has a higher yield in part of its riskier assets in Indonesia.

CDREIT to benefit in the short term. We believe that In the remaking of Singapore, tourism is a more compelling catalyst to the segment and CDREIT will benefit most in the short term. In addition, it has recently made its second acquisition of the Novotel Clarke Quay hotel since IPO, after its first acquisition of the Rendevous Hotel Auckland. The acquisition is expected to increase its DPU by 8.9% with an annualised property yield of 5.5% in FY07.

Our sensitivity analysis indicates that for every 10% increase in room rates, CDREIT’s yield will increase 0.25%-0.28%.

May 21, 2007 ART, CDL H-Trust, FirstREIT No Comments »

CDL HTrust – BT

CDL H-Reit buys Clarke Quay hotel

Novotel Clarke Quay purchase prices 398-room hotel at $219.8 million

CDL Hospitality Real Estate Investment Trust (CDL H-Reit) has purchased the Novotel Clarke Quay in a deal that prices the 398-room hotel at $219.8 million or about $552,000 per room. The amount comprises a purchase amount of $201 million and assumption of potential liability of about $18.8 million. The hotel site has a remaining lease of about 70 years.

For the seller, a Lehman Brothers entity, the divestment represents a doubling of its investment. Lehman bought the hotel, then known as Hotel New Otani, in 2004 for $82 million from a Wuthelam Group-controlled entity and spent a further $19 million renovating it, resulting in an all-in investment of around $101 million. It later appointed French hotel chain Accor to manage the hotel under the four-star Novotel brand.

Jones Lang LaSalle Hotels brokered the latest sale.

CDL H-Reit is part of a stapled group, CDL Hospitality Trusts, which is listed on the Singapore Exchange. Singapore-listed City Developments Ltd’s London-listed hotel arm, Millennium & Copthorne Hotels (M&C), has a 39 per cent stake in CDL Hospitality Trusts.

The yield-accretive acquisition of Novotel Clarke Quay will boost CDL Hospitality Trusts’ Singapore hotel room count by around 20 per cent to 2,324, making it Singapore’s biggest hotel owner, in terms of number of rooms. The acquisition will also see the value of the trusts’ properties grow from about $1.1 billion to $1.3 billion.

CDL H-Reit will enter a lease agreement appointing the hotel’s incumbent manager Accor SA to manage and operate the hotel under the Novotel flag until end-2020, for a fee that works out to a tad below 10 per cent of the hotel’s gross operating profit. The projected annualised property yield of the hotel for this year is about 5.5 per cent, higher than the 3.9 per cent implied property yield for CDL H-Reit’s current portfolio for the current year.

The acquisition is forecast to boost annualised 2007 distribution per unit (based on Q1 2007 results) by 8.9 per cent, from 7.10 cents to 7.73 cents. Vincent Yeo, CEO of M&C Reit Management Ltd, the manager of CDL H-Reit, said that assuming the acquisition of Novotel Clarke Quay is fully funded by debt, the trusts’ gearing ratio will increase from 35 per cent to 46 per cent. He said that while the trust is on the lookout for more hotel acquisitions in the Asia-Pacific – in countries like China, India, Philippines and Vietnam – Singapore still remains one of his favourite markets because of its growth potential and risk profile.

For Q1 2007, CDL Hospitality Trusts’ Singapore hotels achieved a 25.4 per cent year-on-year increase in revenue per available room (RevPar). ‘Based on the strong performance so far in the second quarter, the industry players expect a much higher year-on-year RevPar growth in Q2. And we expect that to be the same for the hotels in the CDL Hospitality Trusts.’

The acquisition of Novotel Clarke Quay will increase CDL Hospitality Trusts’ exposure to the strong Singapore hotel market, which is expected to benefit from continuing strong growth in visitor arrivals and minimal new hotel room supply this year and next.

May 18, 2007 CDL H-Trust No Comments »

CDL – GS

CDL REITS, gs remains a BUY with target price $2.13

– What’s changed . CDLHT net income for 1Q07 rose 40% yoy to S$11.3 mn helped by a 25% jump in RevPAR for its 4 Singapore hotels. Distribution per unit (DPU) for the latest quarter of 1.75 cents exceeded management’s projections by 28%. On an annualized basis, DPU was 7.1 cents, slightly lower than our FY07 forecast of 7.72 cents. We attribute the difference to seasonality, and highlight that all operating metrics since listing in July ’06 suggest good health 1) Revenue grew 60% to S$18.0m (from S$11.3m in 3Q06); 2) RevPAR grew 9.3% to S$153 (from S$140 in 3Q06); and, 3) Net Property Income grew 62% to S$16.7m (from S$10.3m in 3Q06).


– Implications. We believe 1Q07 results were positive and remain comfortable with our FY07 earnings and DPU forecasts. We continue to favor the Singapore hotel sector and are confident of demand absorbing the expected 10% growth in hotel rooms between end-2008 and end-2006. We note that for Singapore hotels, 1Q is traditionally the weakest quarter because of holidays such as the Lunar New Year in February. RevPAR for its Singapore hotels in 3Q06 and 4Q06 were 15% and 20% higher than in 1Q06 respectively. Given a stronger 2H07 and sustained visitor growth, we expect CDLHT to deliver 2-yr EPS CAGR of 8.5% per annum over FY07-09F.


– Valuation. We maintain our DCF based 12-m TP of S$2.13 for CDLHT, implying a share price upside potential of 16.4% and total returns of 20.6%. We like the dynamics for hotels in Singapore and look to CDLHT’s acquisition of the 440 room Copthorne Orchid as a catalyst. This hotel is subject to a right of first refusal granted by CDLHT’s sponsor Millennium & Copthorne.
May 5, 2007 CDL H-Trust No Comments »

CDL – DBS

CDL REITS, DBS remains a BUY with target price $2.20

– Revenue was in line, net investment income was slightly above our expectations due to higher occupancy levels. The 1Q07 gross revenue registered at S$18m and net property income hit S$16.7m, both 30% and 32% above the proforma numbers. The portfolio enjoyed higher occupancies (from 82% to 84%) and higher weighted average room rate (S$182 vs S$162) than the proforma numbers with RevPAR increasing from S$132 to S$153, an increase of 16%. The New Zealand property enjoyed occupancy of 78% at an average daily rate of NZ$142 and RevPAR of NZ$111. The DPU for the quarter hit 1.75cents, or an annualised rate of 7.1cents, 27.7% above the proforma forecast.

– The outlook for the hotel market continues to be strong with tight supply situation in Singapore and high demand from both business and leisure travellers. Singapore Tourism Board (STB) expects number of visitor arrivals growing at a CAGR of 6.4% from 2006 to 2015. On the supply front, the addition of 2,849 rooms by the end of 2008 may be inadequate in the face of robust demand. In New Zealand, the Ministry of Tourism said growth would be at 4.9% y-o-y and rising to 59.8 mn in 2012, underpinned by increased exposure of New Zealand as a tourist destination. We expect growth of 15% in room rates in Singapore for 2007. Further growth is also expected through CDL REIT’s expansion plans locally as well as overseas, especially in high-growth countries like China, India, Vietnam and the United Arab Emirates. The group plans to increase contribution of overseas contribution from 10% currently to 40%.

– With the potential asset injection from parent M&C or via third-party acquisitions, as well as the continued increase in business travel volume to Singapore and around the region, we remain positive on CDREIT. Maintain BUY with no change in assumption and TP of S$2.20 backed by DCF calculation.

May 5, 2007 CDL H-Trust No Comments »

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.

May 5, 2007 CDL H-Trust No Comments »