Singapore Hospitality - DBS Research 2016-04-13: New hope or false dawn?

Singapore Hospitality - DBS Research 2016-04-13: New hope or false dawn? ASCOTT RESIDENCE TRUST A68U.SI  ASCENDAS HOSPITALITY TRUST Q1P.SI  CDL HOSPITALITY TRUSTS J85.SI  FRASERS HOSPITALITY TRUST ACV.SI  FAR EAST HOSPITALITY TRUST Q5T.SI 

Singapore Hospitality - New hope or false dawn? 

  • Stronger than expected start to the year with 12% rebound in tourist arrivals and positive RevPAR growth. 
  • Postive surprise with bounce in Indonesian tourist arrivals. 
  • Sustained recovery in RevPAR still uncertain with main supply pressures yet to hit. 
  • Attractive sector valuations. Top pick – CDL Hospitality Trust (BUY, TP S$1.54). 

Positive start. 

  • The Singapore hospitality market had a stronger than expected start to 2016 with total tourist arrivals for 2M16 jumping 12% y-o-y or 10% y-o-y after adjusting for the extra day in February this year versus our 3% growth projection for 2016. This was driven by 11% and 34% higher Indonesian and Chinese arrivals respectively. 
  • Meanwhile, industry wide RevPAR rose 1.9% to S$210 underpinned by occupancy increasing 130bps to 84.8% and ADR (average daily room rate) ticking up 0.3% to S$248. This bodes well for the upcoming 1Q16 results season. 

RevPAR outlook unclear due to looming supply. 

  • While the strong start especially arrivals from Indonesia (+11% for 2M16 versus our forecast of 0% growth for 2016) was a positive surprise, we remain cautious over the full year RevPAR as the majority of the 6% y-o-y growth in new room supply is yet to hit. 
  • We project 4-5% decline in RevPAR in 2016. 
  • In addition, the recovery in RevPAR was lead by the Luxury (+3% y-o-y) and Upscale (+2%) segments, which may have been boosted by a greater portion of higher yielding corporate guests attending the Singapore Airshow. Thus, given weak sentiment among corporates, the recovery in 2M16 may not be sustained especially as the Economy segment remains weak (4% drop in RevPAR). 

Attractive valuations. 

  • Despite our cautious stance on overall industry RevPAR this year, we believe the expected weakness has largely been priced in, with sector valuations at depressed levels (up to 30% discount to book). 
  • Our top sector pick remains CDL Hospitality Trust (BUY, TP S$1.54) as its Singapore portfolio trades on an implied price per key of c. S$500k which is below recent market transactions of over S$650k and replacement costs of c. S$750k. 
  • In addition, it offers an attractive 7.1% FY16F yield with upside risk should CDREIT outperform our conservative forecasts of a 5-6% drop in RevPAR for its Singapore hotels.

Peer Comparison






Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-04-13

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


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