DBSVickers Report - 18 Jan 2008

CDL Hospitality Trusts Largest Singapore hotel owner, direct RevPAR play

Story: We hosted CDL Hospitality Trusts (CDL HT) at The Pulse of Asia Conference. Management reiterated their positive views on the hotel sector in Singapore.

Point: Key takeaways are:

(i) CDL HT is now the largest hotel owner in Singapore, and likely to remain Singapore-centric over the next 2-3 years;
(ii) asset enhancement was explored, but thwarted by rising construction costs; and
(iii) smaller hotels with better control on room rates and smaller F&B component with lower margins offer better yield-enhancing opportunities, as illustrated by the strong performance of Copthorne King’s Hotel.

Relevance: We reiterate CDL HT, as our top pick for the hotel sector. The counter is well positioned to leverage on the rising RevPAR in Singapore. We have a BUY call on CDL HT with target price of S$2.90 per unit. The stock is trading at an attractive FY08 yield of 4.9% and 5.9% yield for FY09, underpinned by growth of 26% and 21%, respectively.