Singapore | REITs

Asia Pacific Equity Research

CDL HOSPITALITY | BUY

MARKET CAP: USD 1.5B AVG DAILY TURNOVER: USD 2M 2 Jul 2012 Company Update

GARDEN OF SUPERTREES
The unveiling of a major attraction Marina Bay highlights Good growth to continue for hotels

BUY (maintain)
Fair value add: 12m dividend forecast versus: Current price 12m total return forecast S$2.04 S$0.12 S$1.95 11%

Gardens by the Bay Supertrees and Cloud Forest Singapore has reached another major tourism milestone with the official opening of the 101-hectares Gardens by the Bay last Thursday. The top 10 gated attractions for 2011 were Sentosa Island (excluding RWS), Universal Studios Singapore, Singapore Zoo, Singapore Flyer, Skyline Luge, Science Centre Singapore, Underwater World Singapore, Songs of the Sea, Night Safari, and the MBS Sky Park. Night Safari has upwards of 1.1m visitors annually, which means the current minimum number of visitors to make the top 10 list could be less than 1.1m. We would not be surprised if the conservatories of Gardens by the Bay break into the top 10 attractions list by 2015. Solidifying the Marina Bay tourism cluster Sentosa Island is the tourism heavyweight, accounting for half of the top 10 attractions. With Gardens by the Bay and the recently-opened Marina Bay Cruise Centre, the Marina Bay area will strengthen as a tourism cluster that complements Sentosa. The obvious key beneficiary will be MBS, but there should be significant spillover for other hotel players. The continuous upgrading of Singapores position as a leisure hotspot will help the city keep the crown as the global MICE king. Impact on hotel room demand STB has a target of 17m visitor arrivals by 2015, implying a growth rate of 6.6% p.a. from 2011. Even with a leakage from the conversion of visitor arrivals into hotel rooms nights because cruise passengers are much less likely to book hotel rooms, we estimate that hotel room demand will grow by an enviable 6.4% p.a., easily outstripping the growth in hotel rooms, which we estimate at 3.7% p.a. The 6.4% estimate conservatively assumes no change in hotel room nights per hotel guest. Maintain BUY We maintain our BUY rating on CDLHT and our RNAV-derived fair value estimate of S$2.04. It is offering an attractive yield of 6.3%.
Key financial highlights Year Ended Dec 31 (S$m) Gross revenue Total property expenses Net property income Income available for distribution DPU per share (S cents) Cons. DPU (S cts) DPU yield (%) P/NAV (x) ROE (%) Net income margin (%) FY10 122.3 -7.2 115.1 100.7 9.6 na 4.9 1.3 10.2 111.1 FY11 141.1 -5.9 135.2 118.1 11.0 na 5.7 1.2 11.7 124.9 FY12F 156.9 -6.4 150.6 130.4 12.2 11.5 6.3 1.2 7.7 76.0 FY13F 165.1 -6.6 158.5 136.8 13.0 11.9 6.6 1.2 8.0 75.8

Analysts Sarah Ong (Lead) +65 6531 9678 sarahong@ocbc-research.com Kevin Tan +65 6531 9810 kevintan@ocbc-research.com

Key information Market cap. (m) Avg daily turnover (m) Avg daily vol. (m) 52-wk range (S$) Free float (%) Shares o/s. (m) Exchange BBRG ticker Reuters ticker ISIN code GICS Sector GICS Industry Top shareholder S$1,884.2 / USD1,483.4 S$2.8 / USD2.2 1.7 1.345 - 2.12 67.5 966.2 SGX CDREIT SP CDLT.SI J85 Financials REITs Hospitality Hldgs32.5% 1m 5 2 3m 12 15 12m 2 5

Relative total return Company (%) STI-adjusted (%) Price performance chart
Shar e Pr i ce (S$ ) 2.33 2.08 1.82 1.57 1.31 1.06 Jul-11 Oct-11 Jan-12

Index Level 3500 3100 2700 2300 1900 1500 Apr -12

Fair Value
Sources: Bloomberg, OIR estimates

CDREIT SP

FSSTI

Industry-relative metrics
P er c ent i l e 0t h 25t h 50t h 75t h 100t h

M k t Cap B et a ROE PE PB

Company

I ndust r y A v er age

Note: Industry universe defined as companies under identical GICS classification listed on the same exchange. Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document.

MICA (P) 035/06/2012

OCBC Investment Research Singapore Equities

Exhibit 1: Cruise visitor growth will only moderate hotel demand growth slightly
Project Name 2011 ASSUMED INCREASE BY 2015 2015E % INCREASE CAGR (2012-2015)
Sources: STB, OIR estimates Note: Using Arrivals by Air/Land as a proxy for hotel demand

Arrivals by Sea (m) 1.33 0.5 1.83 37.6% 8.3%

Arrivals by Air/Land (m) 11.77 15.17 28.1% 6.4%

Total Visitor Arrivals (m) 13.2 STB TARGET: 17.0 29.1% 6.6%

Exhibit 2: Ranking of cities by number of international meetings, 2011

Singapore Brussels Paris Vienna Seoul Budapest Tokyo Barcelona Berlin Geneva 0 100 200 300 400 500 600 700 800 900 1000

Source: Union of International Associations

OCBC Investment Research Singapore Equities

Company financial highlights

Income statement Year Ended Dec 31 (S$m) Gross revenue Total property expenses Net property income Net finance costs Manager's management fees Other expenses Net income bef. revaluation Revaluation gain on invstmt properties Total return after taxation Income available for distribution

FY10 122.3 -7.2 115.1 -16.6 -10.2 -1.4 86.9 51.4 135.9 100.7

FY11 141.1 -5.9 135.2 -13.2 -11.7 -2.8 107.6 73.2 176.3 118.1

FY12F 156.9 -6.4 150.6 -15.3 -12.9 -3.1 119.3 0.0 119.3 130.4

FY13F 165.1 -6.6 158.5 -16.7 -13.5 -3.2 125.1 0.0 125.1 136.8

Balance sheet As at Dec 31 (S$m) Investment properties Properties under development Cash (including restricted cash) Total current assets Total assets Current liabilities ex debt Debt Total liabilities Unitholders' funds Total equity and liabilities

FY10 1,787.1 0.0 67.8 82.7 1,869.9 21.8 381.1 409.7 1,460.2 1,869.9

FY11 2,029.8 0.0 70.5 88.5 2,118.5 23.6 534.8 570.8 1,547.7 2,118.5

FY12F 2,029.8 0.0 83.4 103.4 2,133.3 26.2 534.8 574.8 1,558.5 2,133.3

FY13F 2,029.8 0.0 93.6 114.7 2,144.6 27.6 534.8 576.9 1,567.7 2,144.6

Cash flow statement Year Ended Dec 31 (S$m) Net income of H-REIT Adjustments Operating income before working cap chgs Change in working capital Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Change in cash Cash at beginning of period Cash at end of period

FY10 138.3 -26.7 111.6 4.7 116.3 -244.4 190.2 62.1 5.7 67.7

FY11 180.8 -49.2 131.6 -0.9 131.1 -166.2 37.8 2.7 67.7 70.5

FY12F 119.3 25.7 145.0 0.5 145.5 -11.1 -121.6 12.9 70.5 83.4

FY13F 125.1 27.6 152.8 0.3 153.0 -10.9 -131.9 10.2 83.4 93.6

Key rates & ratios DPU per share (S cents) NAV per share (S$) PER (x) P/NAV (x) NPI margin (%) Net income margin (%) Gross gearing (%) DPU yield (%) ROE (%) ROA (%) Sources: Company, OIR forecasts

FY10 9.6 1.5 13.7 1.3 94.1 111.1 20.4 4.9 10.2 7.3

FY11 11.0 1.6 10.7 1.2 95.8 124.9 25.2 5.7 11.7 8.8

FY12F 12.2 1.6 15.8 1.2 95.9 76.0 25.1 6.3 7.7 5.6

FY13F 13.0 1.6 15.2 1.2 96.0 75.8 24.9 6.6 8.0 5.9

Company financial highlights

OCBC Investment Research Singapore Equities

SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report hold NIL shares in the above security.

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RATINGS AND RECOMMENDATIONS: - OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

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Important disclosures