Friday, February 12, 2010

CDL Hospitality trust

Nice setup:

How would I play this?
  • Buy at sppt 1.62?
  • Wait for triangle breakout?
On the negative side, there is a lot of overhead resistance form last year:

A quick look at the fundamentals:
  • Yield is 5%, at a 95% payout ratio (@ stock price of $1.69).
  • (Before the Aust acquisition) Gearing was low at only 283m (3 yr loan due Jul 2012). Properties are carried on balance sheet at 1.5bn, giving leverage of 19%. MAS regulations (Sect 9.2) allow 60% leverage, but most REITS aim for 40%. Thus they could potentially double their borrowings (and yield).
  • (For Aust Acquisition) Expected to be fully funded via debt through debt in A$ and SGD (expected 50/50). Post-acquisition, H-REIT’s debt-to-assets ratio assuming 100% debt financing will be approximately 30.0%. (When are these debts due?)
  • Have not checked how cyclical this CDL Hospitality's income is. Read somewhere (the Egde) that their hotels still had to pay a minimum rent even if their occupancy was low....won't check this now.
Due to low gearing, has a plausible growth story.

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