Singapore Hospitality - DBS Research 2016-01-21: Continues to struggle

Singapore Hospitality - DBS Research 2016-01-21: Continues to struggle ASCOTT RESIDENCE TRUST A68U.SI  ASCENDAS HOSPITALITY TRUST Q1P.SI  CDL HOSPITALITY TRUSTS J85.SI  FRASERS HOSPITALITY TRUST ACV.SI  OUE HOSPITALITY TRUST SK7.SI  FAR EAST HOSPITALITY TRUST Q5T.SI 

Singapore Hospitality - Continues to struggle 

  • November 2015 RevPAR down 5% despite 4% rebound in tourist arrivals 
  • Expect hospitality REITs to report soft 4Q15 results 
  • Supply headwinds to persist heading into 2016 
  • Top pick – CDREIT (BUY, TP S$1.54) 


What’s new 

  • Singapore Tourism Board (STB) released the latest November 2015 statistics which indicates that the Singapore hospitality market continues to struggle on the back of a 6-7% increase in new room supply. 
  • Overall RevPAR for Nov15 dropped 5.1% y-o-y to S$207, taking 11M15 industry RevPAR to S$210 (-5.2% y-o-y). The main driver for the decline in RevPAR was the 4% drop in ADR to S$243 while occupancy only saw a 0.7% dip to 85.3%. 
  • Weakness was seen across all sub-segments (Economy: - 4.9%, Mid-Tier: -6.0%, Upscale: -4.6%) with the exception of Luxury (+1.8%). 
  • The weak hotel performance was in spite of tourist arrivals jumping 4.3% y-o-y to 1.2m. The bounce in November was largely attributed to visitors from China (+20% y-o-y) and India (+21.5%), partially offset by declines from Indonesia (-8.7%). 11M15 tourist arrivals were up 0.4% y-o-y following a recovery since May. 

Our view 

  • The weakness in RevPAR and recovery in tourist arrivals was in line with our expectations, and the Singapore hospitality market is on track to hit our estimate of a 5% fall in RevPAR and total visitor arrivals of c.15m in 2015. 
  • In 2016, we expect the recovery in China arrivals to continue and combined with the boost from an increased number of large conferences, should translate to a 3% bounce in overall tourist arrivals. Nevertheless, on the back of 6-7% increase in new room supply, we expect overall RevPAR to dip 4%. 
  • Against this backdrop, we expect hotels under various SREITs to remain under pressure with the hospitality REITS delivering weak 4Q15 results. 
  • Nevertheless, with share prices of various hospitality REITs having already corrected significantly, value is emerging. 
  • Our top pick remains CDREIT (BUY, TP S$1.54), given extremely depressed valuations. The implied price per key for CDREIT’s Singapore portfolio stands at c.S$440k which is below recent market transactions of above S$650k.





Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-01-21

CIMB Securities SGX Stock Analyst Report BUY Maintain BUY 1.33 Same 1.33
BUY Maintain BUY 0.77 Same 0.77
BUY Maintain BUY 1.54 Same 1.54
BUY Maintain BUY 0.83 Same 0.83
BUY Maintain BUY 0.91 Same 0.91
HOLD Maintain HOLD 0.63 Same 0.63


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