We keep our DPU estimates, DDM target price (discount rate: 8.1 per cent) and Outperform rating. We see catalysts from higher-than-expected RevPAR (revenue per available room) and accretive debt-funded AEI (asset enhancement initiatives) and acquisitions, backed by balance-sheet strength and retained earnings.
What Happened: Tourist arrivals in Singapore were a record 1.2 million for the month of April. Y-o-y growth was commendable at 9 per cent albeit lower than previous months' 13-16 per cent. April's growth was led once again by Asian travellers and likely the biannual Food & Hotels Asia fair in the month. RevPAR grew 10 per cent y-o-y to $226.40/day, the result of stronger occupancy (+one percentage point) and average room rate ARR (+9 per cent y-o-y), particularly for upscale hotels.
What We Think: We estimate visitor arrivals of 14.1 million (+7 per cent y-o-y) and RevPAR growth of 6 per cent y-o-y for 2012; there could be upside with more events and attractions in store for the year. International Cruise Terminal had commenced operations in late May while CommunicAsia and the opening of Gardens by the Bay should contribute in June.
The performance of upscale hotels was strong, with consistently high occupancy of 90 per cent and above-peers ARR growth. RevPAR for mid-tier hotels was up 1 per cent y-o-y, where ARR growth took up some slack from lower occupancy. On this basis, we think CDLHT should perform well, with most of its hotels operating in these tiers.
What You Should Do: Stock is up more than 20 per cent YTD. While not exactly cheap at 1.2x P/BV, it still trades below its long-term average of 1.3x P/BV. Conditions remain conducive for outperformance given tight room supply of 3.1 per cent of existing stock. Low leverage of 26 per cent also leaves room for accretive AEI and acquisitions. We see catalysts from higher-than-expected RevPAR and accretive debt-funded AEI and acquisitions.
OUTPERFORM
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