Mid-tier hotel segment expected to perform better than others in FY09. Benefiting from the “trading-down” effect from the luxury segment, we believe that the mid-tier hotel segment could be the best performing sector in FY09. Therefore,
CDL HT’s hotel portfolio, which comprises mainly strategically located mid-hotels, is expected to perform better than its hospitality peers in the current year. In addition, a relatively large base of airline crew and business travelers (c15-20% of clientele) should provide a certain degree of stability to earnings in this challenging year.
Lease structure limits downside to earnings.
CDL HT’s earnings are based on a fixed + variable structure, which protects earnings downside to
cS$46m, translating to an estimated
DPU per share of c. 2.6
Scts or 40% of our FY09-10F projected
DPU estimates.
Near term weakness, longer term growth. As one of Singapore’s largest hotel owners,
CDL HT is a direct beneficiary of the anticipated boom in tourist trade and MICE travelers when the integrated resorts open in 2010. Maintain BUY,
TP S$0.88 based on
DDM. In addition, the
reit offers investors an attractive FY09-10F 11% yield.
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