CDL Hospitality Trusts

We are raising our 2012 RevPAR growth estimates from 5.5% to 7.5% for CDLHT’s Singapore hotels on the basis of strong Singapore hotel figures year to date and continued positive outlook. A senior executive of Millennium & Copthorne (M&C) International expects room rates at M&C’s five Singapore hotels to grow 5% YoY from ~S$219 in 2011, while occupancies could climb by 2-3 ppt from 87%. RevPAR for these hotels have already increased 10% in the first two months of this year. These five hotels are on master leases whereby CDLHT receives rent in the form of 20-30% of the hotel revenue and 20% of the hotel gross operating profit, subject to minimum fixed rents. The hotels constituted 60.5% of CDLHT’s 2011 gross revenue. We maintain our BUY rating on CDLHT and raise our fair value estimate to S$2.04 (from S$2.00 previously).

Positive signs for hotels
According to the Singapore Tourism Board, for the first two months of 2012, RevPAR for Singapore hotels climbed 19.1% YoY on the back of a 14.5% YoY increase in room rates and an increase in occupancy rates. A senior vice-president of Millennium & Copthorne (M&C) International, Lim Boon Kwee, was quoted in a Business Times article dated 9th Apr as saying he expects that room rates at M&C’s five Singapore hotels will grow 5% YoY from ~S$219 in 2011, while occupancies could climb by 2-3 ppt from 87%. Mr. Lim said that RevPAR for the M&C hotels increased by 10% for the first two months of this year.

Raising RevPAR growth assumption
These above-mentioned M&C hotels (Orchard Hotel, Copthorne King’s Hotel, Grand Copthorne Waterfront Hotel, M Hotel and Studio M Hotel) are owned by CDLHT and M&C is the master leasee. CDLHT receives rent in the form of 20-30% of the hotel revenue and 20% of the hotel gross operating profit, subject to minimum fixed rents. The hotels constituted 60.5% of CDLHT’s 2011 gross revenue. CDLHT has one other hotel in Singapore – Novotel Clarke Quay, which is managed by Accor and which we assume will perform similar to the M&C hotels. We are raising our RevPAR growth rate assumption from 5.5% to 7.5% for CDLHT’s Singapore hotels in 2012.

Corporate guests and events
Corporate guests account for ~65% of CDLHT’s guests in the Singapore hotels, thus MICE events are an important driver. A key MICE event in the first quarter was the Singapore Airshow (Feb). Food&HotelAsia 2012 is currently running (17th-20th Apr) and is expecting to draw over 54k attendees, up ~3.8% from 2010. Other major events lined up this year include CommunicAsia (Jun) and the F1 Singapore Grand Prix (Sep).

Maintain BUY; raising fair value to S$2.04
We maintain our BUY rating on CDLHT and raise our fair value estimate to S$2.04 (vs. S$2.00 previously).