Saturday, December 7, 2013

CDL Hospitality Trusts: Proposed acquisition of Jumeirah Dhevanafushi (OCBC)

CDL Hospitality Trusts:
Fair value S$1.84
add: 12m dividend forecast S$0.105
versus: Current price S$1.580
Proposed acquisition of Jumeirah Dhevanafushi

CDL Hospitality Trusts (CDLHT) has entered into conditional land and business sale agreements with Xanadu Holdings Pvt Ltd for the acquisition of Jumeirah Dhevanafushi in the Maldives at US$59.6m (~S$74.8m). Based on the purchase price and assuming that CDLHT owned the property from 1 Jan 2013, the pro forma annualised net property income yield of the property for the nine months ended 30 Sep 2013 would be 6.2%. While management indicated that the 4Q13 and 1Q14 performance for its Singapore hotels is still lackluster, this is within our expectations. We roll over our DDM model to FY14 numbers. Despite using a more conservative risk free rate of 3.0% (instead of 2.4% previously), our FV increases from S$1.83 to S$1.84 and we maintain our BUY rating on CDLHT.


Second property in the Maldives
CDLHT has entered into conditional land and business sale agreements with Xanadu Holdings Pvt Ltd for the acquisition of Jumeirah Dhevanafushi, a top-end 5-star resort in the Maldives, at US$59.6m (~S$74.8m). Based on the purchase price and assuming that CDLHT owned the property from 1 Jan 2013, the pro forma annualised net property income yield of the property for 9M13 would be 6.2%. On a pro forma annualised basis for 9M13, this translates to a DPS accretion of 2.2%, with potential improvement as the property is gestating (it only opened on 1 Nov 2011). The acquisition will be fully funded by debt, bringing gearing up from 28.1% to 30.6%. CDLHT’s business trust (HBT) will be activated and upon the completion of the acquisition, the HBT lessee will lease the property from the H-REIT (CDLHT’s REIT). The vendor is not related to the hotel manager, Jumeriah, which is most well-known for operating the Burj Al Arab. Jumeriah will continue to operate the hotel under a management contract with HBT.

~9% NPI yield more likely after stabilisation
We understand that the valuers were using a 9% capitalisation rate and management expects the stabilised NPI yield to be in the region of 9%, hopefully within 2-3 years. 1Q and 4Q are traditionally strong quarters for tourism in the Maldivies; roughly, over a third of revenues comes from 1Q, less than one third comes from 2Q and 3Q combined, and one third comes from 4Q. Hence, the 6.2% yield calculated based on 9M13 performance is conservative. The property generally sees strong occupancy of over 80%. About a fifth of revenue from the property comes from F&B. The GOP margin is ~40%. We assume the acquisition will be completed on 1 Jan 2014.

FV of S$1.84
While management indicated that the 4Q13 and 1Q14 performance for its Singapore hotels is still lackluster, this is within our expectations. We roll over our DDM model to FY14 numbers. Despite using a more conservative risk free rate of 3.0% (instead of 2.4% previously), our FV increases from S$1.83 to S$1.84 and we maintain our BUY rating on CDLHT.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 05/12/13

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