CDL Hospitality Trusts

OCBC on 30 Jul 2012

2Q12 revenue increased 6.0% YoY to S$36.6m, versus +19.0% for 1Q12. YTD DPU of 5.70 S-cents made up 47% of our initial full-year forecast. We are changing our full year RevPAR growth assumption from 7.5% to 6.8% (excluding Studio M Hotel) given that we expect 2H12 RevPAR growth momentum to be subdued compared to 1H12. We are easing our FY12 payout assumption for income available for distribution to 90% and lowering our FY12 DPU estimate from 12.2 S-cents to 11.9 S-cents. To better reflect the prevalent low-interest rate environment, we have lowered the cost of equity assumption in our model and raised our fair value marginally from S$2.04 to S$2.06. However, as CDLHT's share price has run up 6.7% since our last report on 2 Jul 2012, we downgrade CDLHT to HOLD on valuation grounds.

NPI dips due to 1Q11 one-off tax refund
2Q12 revenue increased 6.0% YoY to S$36.6m, versus +19.0% for 1Q12. The 2Q12 revenue growth was due to a climb in RevPAR for the Singapore hotels and the recognition of a full quarter's revenue contribution (91 days) from Studio M Hotel as compared to only 59 days in 2Q11. However, 2Q12 contribution from the Australia hotels was lower by S$0.16m as compared to in 1Q11 due to weaker AUD translation. Net property income dipped 4.2% YoY to S$34.1m due to a one-off property tax refund of S$3.3m in 2Q11. Income available for distribution dipped 0.9% YoY to S$31.4m.

Slower RevPAR growth
Excluding Studio M Hotel, which was acquired in May 2011, the Singapore hotels registered a RevPAR of 5.9% YoY, versus a RevPAR growth of 9.3% YoY for 1Q12. We were already expecting lower YoY growth momentum for CDLHT given slower growth in 2Q12 visitor arrivals. According to management, corporates were giving hotels in the industry less visibility by making bookings later and this reduced the potential room rate increases despite occupancy doing well. 1H12 RevPAR grew 7.5% YoY to S$215. Given that we expect 2H12 RevPAR growth momentum to be subdued compared to 1H12, we are lowering our full year RevPAR growth assumption from 7.5% to 6.8% (excluding Studio M Hotel).

Easing FY12 payout assumption
YTD DPU of 5.70 S-cents made up 47% of our initial full-year forecast. We are easing our FY12 payout assumption for income available for distribution to 90% and lowering our FY12 DPU estimate from 12.2 S-cents to 11.9 S-cents.

Downgrade to HOLD
To better reflect the prevalent low-interest rate environment, we have lowered the cost of equity assumption in our model and raised our fair value from S$2.04 to S$2.06 (10% discount to RNAV). However, as CDLHT's share price has run up 6.7% since our last report on 2 Jul 2012, we downgrade CDLHT to HOLD on valuation grounds.