CDL Hospitality Trusts

OCBC on 2 Jul 2012

Gardens by the Bay, which officially opened last Thursday, and the new Marina Bay Cruise Centre will solidify Marina Bay as a key tourist cluster to complement Sentosa. STB has a target of 17m visitor arrivals by 2015, implying a growth rate of 6.6% p.a. from 2011. Even with a “leakage” from the conversion of visitor arrivals into hotel rooms nights because cruise passengers are much less likely to book hotel rooms, we estimate that hotel room demand will grow by an enviable 6.4% p.a., easily outstripping the growth in hotel rooms, which we estimate at 3.7% p.a. The 6.4% estimate conservatively assumes no change in hotel room nights per hotel guest. We maintain a BUY rating on CDLHT and our fair value of S$2.04.

Gardens by the Bay
“Supertrees” and “Cloud Forest” – Singapore has reached another major tourism milestone with the official opening of the 101-hectares Gardens by the Bay last Thursday. The top 10 gated attractions for 2011 were Sentosa Island (excluding RWS), Universal Studios Singapore, Singapore Zoo, Singapore Flyer, Skyline Luge, Science Centre Singapore, Underwater World Singapore, Songs of the Sea, Night Safari, and the MBS Sky Park. Night Safari has upwards of 1.1m visitors annually, which means the current minimum number of visitors to make the top 10 list could be less than 1.1m. We would not be surprised if the conservatories of Gardens by the Bay break into the top 10 attractions list by 2015.

Solidifying the Marina Bay tourism cluster
Sentosa Island is the tourism heavyweight, accounting for half of the top 10 attractions. With Gardens by the Bay and the recently-opened Marina Bay Cruise Centre, the Marina Bay area will strengthen as a tourism cluster that complements Sentosa. The obvious key beneficiary will be MBS, but there should be significant spillover for other hotel players. The continuous upgrading of Singapore’s position as a leisure hotspot will help the city keep the crown as the global MICE king.

Impact on hotel room demand
STB has a target of 17m visitor arrivals by 2015, implying a growth rate of 6.6% p.a. from 2011. Even with a “leakage” from the conversion of visitor arrivals into hotel rooms nights because cruise passengers are much less likely to book hotel rooms, we estimate that hotel room demand will grow by an enviable 6.4% p.a., easily outstripping the growth in hotel rooms, which we estimate at 3.7% p.a. The 6.4% estimate conservatively assumes no change in hotel room nights per hotel guest.

Maintain BUY
We maintain our BUY rating on CDLHT and our RNAV-derived fair value estimate of S$2.04. It is offering an attractive yield of 6.3%.