Arrivals for CDLHT will hold up in 2012, says analyst

Among the cited factors were a larger dependence on Asian travelers and resilient Asian consumption.

Reporting on CDL Hospitality Trust, CIMB said:

We are still expecting 3-5% growth in arrivals which should keep hotel occupancy at 84-86%, given a moderate 4% expected increase in rooms this year, which should allow hoteliers to raise rates.

4Q11 REVPAR of S$205 was its highest for 4Q (+6.0%), mainly on room-rate increases (+7.7%) to S$232, though occupancy dipped 1.4% pts yoy to 88.6%. Qoq performance was boosted by a return of rooms after the completion of upgrading work at Orchard Hotel, its largest asset.

Asset leverage dipped to 25.3% from 26.5% on asset revaluations across its local and Australian properties. This positions it for debt-funded acquisitions and AEI. Management has remained prudent in retaining a larger portion of income (10% vs. 9% in FY10) to fund capex and working capital.

While the stock has been re-rated by 16% since our last note in Dec 11, stock is still trading at 1.1x P/BV vs. its long-term average of 1.3x. Book valuations of about S$600k per room key for its local properties do not appear excessive especially when benchmarked against that of S$900k per room key for some market transactions.

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