OVERVIEW:
The counter is a stapled group comprising CDL Hospitality Real Estate Investment Trust ("H-REIT"), and CDL Hospitality Business Trust ("HBT"). It is established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-producing real estate, which is primarily used for hospitality and/or hospitality-related purpose.
Currently, it owns 14 hotels and two resorts, comprising six hotels in Singapore; five in Australia's key gateway cities of Brisbane and Perth; one in New Zealand's gateway city of Auckland; two in Japan's gateway city of Tokyo, two resorts located in the Maldives, as well as the shopping arcade adjoining Orchard Hotel (Claymore Connect) in Singapore.
HIGHLIGHTS:
(1) 1Q2015 results saw 6% drop of Net Property Income (NPI) year on year. This was mainly due to lower contribution from Singapore hotels which saw Revenue Per Available Room (RevPAR) falling 10% year on year.
(2) Acquisition of Japan Hotels was completed on end of 2014. These hotels registered leap of 21% in RevPAR year on year due to 43% increase of foreign visitors. These income will only contribute to distributable income (in form of dividend) to shareholders from 4Q2015 onwards.
(3) The counter maintained its gearing ratio at healthy range ~ 32%. Floating rate borrowing was reduced from 48% to 39%. It should be ready to cope with any short term rate hike condition. Instead, the management has emphasized its ambition to further acquire profitable opportunity by using ample debt headroom.
INVESTMENT THEMES:
(1) In recognition of headwinds in Singapore tourism, Singapore Tourism Board (STB) has launched a series of initiatives to drive visitorship. Investor could take position for the rebound on tourism. Besides, coming financial results could see some positive catalyst from SEA game 2015.
(2) Generally, research houses put target price > $1.84 for the counter. Current trading price represents >15% of discount. Dividend yield is more that 6% annually. Investor could expect dividend > 0.052 per share to be released on August.
(3) The counter has been shedding >10% in prices. Worry over outbreak of MERS and rate hike from US could have been factored in. From the chart, it has been forming support ~$1.62 which is also nearing lower trading zone over past 3 years. Mid term traders could take position now.
ENTRY PRICE:
BUY ~$1.62
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