CDL Hospitality Trusts:
STI : 3,160.70
Price Target: 12-Month S$1.84 (Prev S$1.80)
Another slice of paradise;
•Second foray into Maldives
•Strong growth potential; yield on cost to reach a high of 7.7% by 2015
•Maintain BUY, TP S$1.84
Second foray into Maldives. CDL Hospitality Trust (CDREIT) announced its acquisition of Jumeirah Dhevanafushi, a 35-villa top-end luxury resort located in Maldives, for US$59.6m (S$74.8m). This is CDREIT’s 2nd acquisition in Maldives and will see its contribution increase to c.7.8% (vs. 4.6% previously) of FY14F net property income.
Activation of H-BT. Unlike previous acquisitions, this deal will see CDREIT activating H-BT, who will act as lessee for the property. H-BT will take on the operations of the resort, including the hotel management agreement with Jumeirah. This arrangement allows CDREIT to enjoy higher cash flow extraction from the property and earnings are likely to mirror actual operations. The absence of a master lease means that there is no earnings downside protection.
Strong growth potential; FY15F yield estimated to hit a high of 7.7%. Despite its short operating history, the property has enjoyed robust occupancy of c.80% and achieved a RevPAR of US$754/night. Given that the property is currently under gestation, we believe that it has the potential to deliver higher RevPARs going forward. We estimate yields to reach 7.7% in FY15F, from 6.2% on an annualised FY13F basis. As such, our DPU estimates are raised by c.3% on average.
Maintain BUY, TP raised to S$1.84. The acquisition will further diversify its earnings stream, while gearing remains low at c.31%. DPU CAGR of 7% over FY13-15F is one of the strongest among peers. Maintain BUY.
Publish date: 05/12/13