Singapore Hospitality - DBS 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).

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.

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