Singapore Hospitality REITs - OCBC Investment 2018-09-06: Do Not Disturb

SG Hospitality REITs - OCBC Investment Research 2018-09-06: Do Not Disturb FAR EAST HOSPITALITY TRUST SGX:Q5T OUE HOSPITALITY TRUST SGX:SK7 ASCOTT RESIDENCE TRUST SGX:A68U CDL HOSPITALITY TRUSTS SGX:J85

SG Hospitality REITs - Do Not Disturb

  • Surprisingly weak 2Q RevPAR growth.
  • Pushing back recovery expectations.
  • Mid-Tier hotels look to outperform.


DPU recap for the quarter




~ SGinvestors.io ~ Where SG investors share

SG RevPAR growth was generally disappointing

  • Recall that after a relatively flat RevPAR performance in 1Q18, we expected RevPAR growth to accelerate for SG hotels as we progressed into the year, allowing for more time since the new supply injection in 4Q17. 2Q growth figures turned out to be generally disappointing.
  • CDL Hospitality Trusts’s RevPAR growth came in at -0.9%, affected by the Trump-Kim Summit and late booking patterns, while 
  • OUE Hospitality Trust’s Mandarin Orchard Singapore recorded -0.5% growth for similar reasons.
  • On the other hand, Far East Hospitality Trust posted a stellar RevPAR growth of +6.9%. If we strip out Oasia Hotel Downtown’s performance, we believe for the wider portfolio’s growth likely came in at +3% to +4% which is still a performance beat.


Tactical calls made



FEHT remains top pick

  • According to the latest STB numbers, Jul visitor arrivals were up 6.0% y-o-y while Jul visitor days were up 3.2%. Jan-Jul RevPAR increased 3.2% y-o-y. Out of the four hotel tiers, y-o-y growth for Jul RevPAR was highest for luxury (+3.9%), followed by Mid-Tier (+1.6%), then Upscale (0.0%), and Economy (-0.4%).
  • Going forward, we continue to expect
    1. robust leisure demand,
    2. soft corporate demand and
    3. continued outperformance of Mid-Tier hotels locally.
  • We push back our expectations of a strong RevPAR pick-up from 2H18 to 2019, and believe defensive names from other sub-sectors may outperform hospitality. For switch ideas, refer to our 31 July S-REITs report: Increase Defensiveness Among Defensives as well as yesterday’s S-REITs sector update: A Defensive Armour Despite Some Chinks.
  • Within hospitality, Far East Hospitality Trust remains our top pick given its
    1. 100% SG-based portfolio,
    2. the mid-tier positioning of its hotels and
    3. the higher chance of operational outperformance given its relative underperformance prior to 2018.
  • Maintain NEUTRAL on hospitality.





Deborah Ong OCBC Investment Research | https://www.iocbc.com/ 2018-09-06
SGX Stock Analyst Report BUY Maintain BUY 0.690 Same 0.690
HOLD Maintain HOLD 0.790 Same 0.790
BUY Maintain BUY 1.250 Same 1.250
BUY Maintain BUY 1.950 Same 1.950



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