MARKET PULSE: CDL Hospitality Trusts & A-REIT (4 April 2012)

Stock Name: CDL HTrust
Company Name: CDL HOSPITALITY TRUSTS

Research House: OCBC

Price Call: BUY

Target Price: 2.00

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: BUY

Target Price: 2.31

MARKET PULSE: CDL Hospitality Trusts & A-REIT

4 Apr 2012

KEY IDEA CDL Hospitality Trusts: Roaring hotel performance in Feb Feb figures for Singapore visitor arrivals and hotel performance were released yesterday. Visitor arrivals for Jan-Feb 2012 totaled 2.3m, up 13.9% YoY and higher than the upper limit of the 2.5-10.1% growth implied by the STB's 2012 goal of 13.5-14.5m visitor arrivals. Hotels across all tiers saw significant growth in Revenue per Available Room (RevPAR) for Feb, with increases ranging 19.2-26.4% YoY on the back of increased occupancy and average room rates. Prospects for the tourism sector continue to look bright and the gradual introduction of junkets should have positive spill-over effects on high-end hotels. We maintain our BUY rating on CDLHT and S$2.00 fair value. (Sarah Ong) MORE REPORTS Ascendas REIT: Still in the pink of health Ascendas REIT (A-REIT) reported that the acquisition of the Cintech properties was completed on 29 Mar at a total consideration cost of S$185.5m. No consideration units were issued as its sponsor Ascendas Land had indicated that it did not wish to receive any equity consideration. As a result, the purchase consideration was fully paid in cash by way of internal resources and drawdown of debt. We estimate A-REIT's aggregate leverage to be around 36% after factoring in revaluation gains for its portfolio properties. We also note that A-REIT's Singapore properties continued to achieve positive rental reversions of 2.6-12.5% YTD upon renewal of its existing leases. This is in line with our view that A-REIT's operating performance is likely to stay resilient in the coming quarters. We now factor in the acquisition of Cintech properties and portfolio revaluation into our forecasts. We also re-jig our DDM model assumptions (cost of equity at 7.5%, up from 7.0% previously) and roll over our valuation to FY13. This raises our fair value marginally from S$2.30 to S$2.31. Maintain BUY. (Kevin Tan)

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NEWS HEADLINES - US stocks fell as factory orders increased less than forecasted and minutes from the latest Fed meeting gave no indication that monetary stimulus is on the way. The S&P 500 Index dropped 0.4% to 1,413.38. - Koh Brothers and United Engineers were jointly awarded a S$54.6m contract from the PUB for the construction of a used-water lift station at the Jurong Water Reclamation Plant. - Japan Foods' S$450k noodle facility has begun trial production. The annual capacity is 2.5m units of noodles. The group currently imports all the noodles for its Ajisen Ramen restaurants. - NERA Telecommunications has received purchase orders worth ~S$22.7m from telecom operators for the supply and maintenance of IP network equipment. - Foreland Fabrictech Holdings said that due to the prevailing market conditions, it is uncertain of the timing of its dual primary listing on the Korean Exchange.