CDL Hospitality Trusts

CIMB Research, Jan 29

FOR FY2013, CDL Hospitality Trusts (CDL-HT) registered a drop in both net property income (NPI) and distributable income by 1.4 per cent and 3.1 per cent, respectively. Revenue per available room (RevPAR) for the quarter dropped to $187, due mainly to lower gross revenue from its Singapore hotels and forex losses. This was mitigated by additional rental contributions of $10 million from Angsana Velavaru, Maldives.

As the global economy continues to recover, we expect corporate spending to strengthen correspondingly in FY2014. With about half of total revenue coming from this source, we expect CDL-HT earnings to strengthen.

In addition, as bi-annual events such as the Aerospace show and Food & Hotel Asia take place this year, coupled with more MICE events, we expect the hospitality market to benefit as a whole.

However, with 2,926 rooms coming online in FY2014, the positive tone is expected to be dampened by the additional competition as the market digests the additional supply.

CDL-HT is trading at 7.0 per cent/7.4 per cent FY2014/2015 dividend yield. As the positive tone of the hospitality sector outweighs the additional supply of hotel rooms in FY2014 and with CDL-HT continuing to benefit from the strong RevPAR growth of its two Maldives hotels, we believe a turnaround for the stock is imminent.

Upgrade to an "add" with unchanged dividend discount model-based TP of $1.79 as management continues to boost earnings via potential acquisitions in countries, such as Japan, Australia and Asia.

ADD