not vested
CDL Hospitality Trusts: Spectre of hotel room glut looms; Hold TP SGD1.94
Mkt Cap USD1.4b
ADTV USD2.0m
The prospect of a slowing economy in China and India, the unfolding of the Eurozone crisis and the US economy’s snail’s-pace recovery will no doubt impact tourism in Singapore.
We are expecting 14.2m tourist arrivals in 2012, up 8% from 13.2m in 2011. From 2011-2015, we believe that hotel room supply (measured in available room nights) will grow at a CAGR of 6.3%, outstripping hotel room demand of 5.9%.
The additional supply of hotel rooms will put a dampener on occupancy, which will peak at 90% in 2012F but ease to 84% in 2014F, according to our estimates.
In our view, the main trigger for CDREIT’s share price is overall average room rate (ARR) growth for the Singapore hotel segment (72% correlation).
We expect Singapore hotels to register 3.2% ARR CAGR (over FY11-FY15F), which should put a cap on CDREIT’s share price.
Reiterate HOLD with DDM-derived TP of SGD1.94.
Source: Kim Eng