Singapore Hospitality - DBS Research 2018-07-06: The Disparity Continues

Singapore Hospitality - DBS Group Research Research 2018-07-06: The Disparity Continues CDL HOSPITALITY TRUSTS SGX:J85 FAR EAST HOSPITALITY TRUST SGX:Q5T OUE HOSPITALITY TRUST SGX:SK7

Singapore Hospitality - The Disparity Continues

  • Wanderlust Hotel sold for c.S$1.3m per key.
  • Transaction highlights still strong pricing for hotels in Singapore.
  • Implied valuations of Singapore hotels in hospitality S-REITs trading below physical market transactions.
  • Top pick – CDL Hospitality Trusts (Target Price of S$2.00).

What’s New

Sale of Wanderlust Hotel for S$1.3m per key

  • According to the Business Times, 29-room Wanderlust Hotel which sits on a freehold title was sold by a company linked to Loh Lik Peng (founder of hotel and restaurant group Unlisted Collection) for S$37m. This translates into c.S$1.3m per key. This analyst report is shared at SGinvestors.io.
  • The buyer is reported to be 8M Real Estate, a Singapore-based privately held property investment company.
  • Wanderlust Hotel is located along Dickson Road, in the Little Conservation Area and is near the Jalan Besar MRT Station.

Our thoughts

  • This transaction follows news that the cost of developing a 340- to 350-room hotel on the ex- Singtel site at Hill Street will be approximately S$1.1m and market speculation was that buyers were willing to pay S$1.3m per key for the Park Hotel Farrer Park.
  • In our view, this news again highlights the disparity in valuations that physical market and equity market investors ascribe to hotels in Singapore. 
  • Currently, the implied value of the Singapore hotels for hospitality REITs ranges from S$625k- S$1m per key. Thus, with hospitality S-REITs trading effectively below replacement cost and the hospitality market expected to be on a multi-year recovery given limited new supply over the next three years, we retain our Overweight stance on the sector, with CDREIT as our top pick (BUY, Target Price of S$2.00). This analyst report is shared at SGinvestors.io.

Janice CHUA DBS Group Research Research | Kee Yan YEO CMT DBS Research | Lee Keng LING DBS Research | https://www.dbsvickers.com/ 2018-07-06
SGX Stock Analyst Report BUY Maintain BUY 2.000 Same 2.000
BUY Maintain BUY 0.760 Same 0.760
BUY Maintain BUY 0.930 Same 0.930