CDL Hospitality Trust’s net property income rose 24% to $29.1m

2Q11 DPU rose 15% YoY, in-line with expectation. CDL Hospitality Trusts (CDLHT) reported DPU of 2.96S¢ (+15.2% YoY; +24.4% QoQ), representing 24% of our FY11 DPU estimate. Net property income rose 24% YoY to S$29.1m in 2Q11 (+18.1% QoQ) mainly due to 1) maiden contribution from Studio M Hotel which was acquired in 3 May 2011, and 2) higher RevPAR for Singapore Hotels at S$205 (+4.8% YoY; +5.1% QoQ), marginally offset by 3) drop in Orchard Hotel capacity due to refurbishment works. Given that the hotel business in Singapore is usually stronger in second half of the year, we expect CDLHT to post higher DPU in subsequent quarters.

Valuation: On the back of 1) lower FY11 distributable income payout assumption of 90% (prev 95%), and 2) higher FY11-FY12 average occupancy rate (AOR) at 88.6-89% (prev FY11-12 AOR: 88-87.5%), we adjusted our FY11-12 DPU by -4.8 - +2.2% respectively. Maintain BUY with lower TP of S$2.41, based on DDM (COE: 8.9%; TGR: 3.0%).