Hospitality REITs - CGS-CIMB Research 2019-10-30: A Good 3Q

REITs - CGS-CIMB Research | SGinvestors.io ASCOTT RESIDENCE TRUST (SGX:A68U) CDL HOSPITALITY TRUSTS (SGX:J85) FAR EAST HOSPITALITY TRUST (SGX:Q5T)

Hospitality REITs - A Good 3Q




Hospitality REITs' 9M19 results in line



REITs had a good 3Q on strong demand

  • As expected, the REITs benefited from strong tourist arrivals (driven by seasonal factors, potential diversion from HK, and stronger attendance for the F1 race) in 3Q19. In tandem with the stronger tourist arrivals in Jul and Aug (+3.5% y-o-y on average vs. ~+1% y-o-y on average in Feb-Jun), CDL Hospitality Trusts had a strong 3Q revenue per available room (RevPAR) of +4.9% y-o-y (3QFY18: -0.6% y-o-y).
  • Far East Hospitality Trust’s 3Q RevPAR was flat y-o-y, partly due to the higher base of +6.3% RevPAR last year; management indicated that better revenue management resulted in better RevPAR towards end-3Q.
  • While Far East Hospitality Trust’s occupancy rose 1.6% pts to 92.3%, average room rate declined 2% to S$164. CDL Hospitality Trusts, on the other hand, reported stronger occupancy (+0.6% pt to 91.4%) and room rate (+4.3% to S$190) in 3Q.


Serviced residence performed better in 3Q

  • Singapore serviced residences delivered good 3Q19 results. Far East Hospitality Trust reported revenue per available unit (RevPAU) of +5.7% on better occupancy and average daily rate which were in turn driven by the leisure market and shorter-stay bookings.
  • Ascott Residence Trust’s Singapore RevPAU rose 2% y-o-y, driven by firm corporate demand; we attribute this to its strong brand name.


Overseas markets affected by weaker currencies and competition

  • The REITs generally did not do so well in the overseas markets, affected by weaker currencies and competition. Based on 3Q19 results, more promising markets in the near term include Japan due to the upcoming Tokyo 2020 Olympics and Paralympics, and Germany with its robust line-up of events in 2H2020. The REITs continue to look out for acquisitions to drive growth with Singapore as the preferred market.


Looking forward to an eventful year in 2020

  • We do not expect a strong 4Q19F given the high base y-o-y (events related to ASEAN Chairmanship which lasted till Nov, and Bloomberg Forum in Nov). Any strong tourist diversions from HK will be a plus. 2020F will be a stronger year due to the presence of biennial and major events such as the annual International Trademark Association meeting, Industrial Transformation Asiapac, and Lions Clubs Convention.
  • We feel that the REITs will have more confidence to raise room rates going forward. They are targeting for positive RevPAR in 2H and low single-digit full-year RevPAR in 2020.


Highlighted Companies


ASCOTT RESIDENCE TRUST (SGX:A68U)


CDL HOSPITALITY TRUSTS (SGX:J85)


FAR EAST HOSPITALITY TRUST (SGX:Q5T)






EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2019-10-30
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.34 UP 1.310
ADD MAINTAIN ADD 1.83 DOWN 1.920
HOLD MAINTAIN HOLD 0.70 UP 0.680



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