CDL H-Trust

CDL H-Trust: OCBC upgrade to Buy with $1.83 TP. House note that based on STB figures, westimate 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, could see stabilization in the sector. CDLHT is 23% below its 52-week peak of $2.12 on 17 Apr, dragged down by poor sector data points and general concern about oversupply. However, 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, raise FV on CDLHT to $1.83 from $1.56. CDLHT is trading at an attractive FY13 dividend yield of 6.4% (based on 90% distributable income payout).