OUE Hospitality Trust - CIMB Research 2017-11-02: 3Q17 RevPAR Improvement Accelerates

OUE Hospitality Trust - CIMB Research 2017-11-02: 3Q17 RevPAR Improvement Accelerates OUE HOSPITALITY TRUST SK7.SI

OUE Hospitality Trust - 3Q17 RevPAR Improvement Accelerates

  • OUE Hospitality Trust (OUEHT)'s 9M17 DPU of 3.87 Scts (+19.1% yoy) was in line with consensus and our expectation, at 76% of our full-year forecast. 3Q17 DPU of 1.36 Scts (+10.6% yoy) was at 27%.
  • The star was MOS, which demonstrated its quality by achieving its second consecutive quarter of improvement in RevPAR, this time to the tune of +8% yoy.
  • Occupancy for Crowne Plaza Changi Airport (CPCA) improved to the low-80% rate in 3Q17, from mid-70% in 2Q17.
  • We keep our forecasts but raise our Target Price (to S$0.84) as we roll-forward our DDM-valuation.
  • Maintain Add as we believe that Mandarin Orchard Singapore (MOS) would offset the absence of income support.
  • Downside risk could come from irrational competition or slower hotel recovery.



3Q17: RevPAR improvement accelerates 

  • 3Q17 DPU grew 10.6% yoy to 1.36 Scts, driven by higher hospitality (+6% yoy in NPI), retail (+4% yoy) and higher income support for the enlarged CPCA (Crowne Plaza Changi Airport). We note that the enlarged CPCA only had two months of contribution in 3Q16. 
  • The highlight of the quarter was Mandarin Orchard Singapore (MOS), which demonstrated its quality by achieving its second consecutive quarter of improvement in RevPAR, this time to the tune of 8% yoy (2Q17: +5% yoy).


MOS: +8% yoy improvement in RevPAR for 3Q17 

  • 3Q17 RevPAR improved 8% yoy to S$242, underpinned by higher ADR (average daily rates) and occupancy. 3Q17 occupancy was near the mid-90% rate (3Q16: high-80%, near to 90%) while ADR improved by c.3% yoy (2Q17: +1% yoy). Higher F&B income also contributed. 
  • Demand was broad-based and sprang from all segments (corporates, leisure and wholesale). 9M17 RevPAR improved 3% yoy to S$223, outpacing the market (+0.5% yoy) and luxury peer group (+0.3% yoy).


Occupancy at CPCA continues to climb up 

  • Occupancy for CPCA improved to the 80%-range (low-80% in our estimation) in 3Q17 from the mid-70% in 2Q17. ADR was roughly the same qoq. Net-net, CPCA achieved a RevPAR of S$180 in 3Q17 (3Q16: S$147). 
  • Another positive was that CPCA saw more transient customers and less wholesale groups in the quarter. 
  • Last, we note that OUEHT has fully drawn down the full income support of S$7.5m, with a final claim of the remaining S$1.6m in the quarter.


Retail: higher average occupancy but lower passing rent 

  • Mandarin Gallery achieved higher average occupancy of 96.4% in 3Q17 (3Q16: 89%). However, the mall recorded an effective rent of S$22.9 psf pm for the quarter (3Q16: S$24.6), due to negative rental reversion in the preceding quarters. 
  • Rental reversion for base rent was about -19% for 3Q17, for c.8.8% of the NLA. 
  • On capital management, gearing and average cost of debt was maintained at 38.1% and 2.8% respectively.


Maintain Add; MOS to offset absence of income support 

  • We are projecting a slight 1% yoy dip in FY18F DPU. Notwithstanding supply pressures in 2H17-1H18 (counteracted by more events in 1H18, e.g. Airshow 2018), we think MOS has bottomed and would achieve c.5% RevPAR growth in FY18F. This, and higher occupancy at CPCA (projected 85%) would offset the loss of income support. 
  • The launch of Terminal 4 and opening of Jewel in early-19 could provide upside surprise for CPCA. For now, we project CPCA will achieve its target annual rent of S$29m-30m by FY20F.




YEO Zhi Bin CIMB Research | LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-11-02
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 0.840 Up 0.820



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......