CDL Hospitality Trusts

UOBKayhian on 31 Oct 2013

(CDREIT SP/BUY/S$1.67/Target: S$1.91)
FY13F PE (x): 14.2
FY14F PE (x): 14.8

Results slightly below expectation. CDL Hospitality Trusts (CDREIT) reported 3Q13 DPU of 2.64 cents, bringing 9M13 DPU to 8.05 cents below our (72%) and consensus (72%) full-year forecasts. This implies a payout ratio of 90% (unchanged).

Maintain BUY with a slightly lower target price of S$1.91 (from S$1.93), factoring in slight DPU revisions. Ytd, CDREIT has declined 11%, vs hospitality peers 6% while the STI’s is up 2%. At current levels, the stock implies a RevPAR decline of more than 25% from its recent high, which we believe is unjustified. Key catalysts include yield- accretive acquisitions in Singapore and overseas. Our target price is based on two-stage dividend discount model (required rate of return: 7.8% and terminal growth rate: 2%).