CDL Hospitality Trusts: Upgrade to BUY on valuation grounds
Summary:
Based on STB figures, we estimate that Hotel RevPAR saw a mild growth of 2% YoY to S$232 in Aug. This compares
favorably to the overall YoY decline for Jan to Aug of 1.9%. With generally positive sentiment from hoteliers
about Sep, we could see stabilization in the sector. CDLHT is 23% below its 52-week peak of S$2.12 on 17 Apr,
dragged down by poor sector data points and general concern about oversupply. However, we believe that the
negative news has been priced in and at the current price level is a reasonable entry point. Incorporating a
risk-free rate of 2.4% (versus 2.7% previously) into our DDM model to reflect lower bond yields, we raise our
FV on CDLHT to S$1.83 from S$1.56. On valuation grounds, we upgrade CDLHT from a Hold to a BUY. On valuation
grounds, we upgrade CDLHT from a Hold to a BUY. CDLHT is trading at an attractive FY13 dividend yield of 6.4%
(based on 90% distributable income payout). (Sarah Ong)
MORE REPORTS
Keppel Corporation: Secures two jack-up rig orders
Summary: Keppel Corporation (KEP) yesterday announced that its offshore and marine arm has secured a contract
from an affiliate of Clearwater Capital Partners to build two premium KFELS B Class jackup rigs. The total
cost of the project is about US$440m, which includes owner-furnished equipment and project management fees.
Scheduled for delivery in 4Q15 and 1Q16, the rigs are more pricey than Clearwater’s earlier order of
same-design rigs from Keppel in Jan 2011 (US$360m for two units, though this figure was just the shipyard
cost). KEP has secured orders worth about S$4.8b YTD, accounting for 96% of our new order win estimate, which
is likely subject to a slight upward revision. Maintain BUY with S$12.53 fair value estimate. (Low Pei Han)
Yoma Strategic Holdings: Strategic alliance with Mitsubishi Corp
Summary: Yoma reported that it has entered into a strategic alliance with Mitsubishi Corporation to jointly
explore business opportunities in Myanmar. In addition, Mitsubishi Corp and Mitsubishi Estate have signed an
MOU to invest in Yoma’s Landmark project (excluding the Peninsula Yangon). We see these developments as
positives which points to management’s continued deal-making ability and ambitions to grow as a major
conglomerate. There are two sets of implications here, in our view. First, that Mitsubishi opted to invest in
the Landmark project before construction is slated to begin in Nov-13 leads us to establish a base case that
the lease completion and subsequent 1-for-4 rights issue at S$0.38 would occur this quarter. Second, we see
this alliance with the blue-chip Mitsubishi cementing Yoma’s reputation (note that Mitsubishi Estate and
CapitaLand are partners in Singapore) and further widening its access to capital and business opportunities in
Myanmar. We would speak with management later today and, in the meantime, put our Hold rating with a fair
value estimate of S$0.87 UNDER REVIEW. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
NEWS HEADLINES
- US stocks on Tue climbed for the first session in three, bouncing back from multi-week lows, as investors
predicted the government’s first partial shutdown in 17 years would be short-lived and cause limited damage.
- Rail operators SMRT and SBS Transit will be fined a total of S$1.11m for five rail incidents.
- Vallianz Holdings said that it has entered into an agreement with Swiber Offshore Construction, a
wholly-owned subsidiary of Swiber Holdings, to buy 50% of its stake in Rawabi Swiber Offshore Services for US
$1.45m.
- Yangzijiang Shipbuilding has secured US$871m of orders for 12 bulk carriers and five containerships.
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