Singapore Hotels - DBS Research 2019-10-09: Sorry We Are Full!

Singapore Hospitality - DBS Group Research  | SGinvestors.io CDL HOSPITALITY TRUSTS (SGX:J85) FAR EAST HOSPITALITY TRUST (SGX:Q5T) ASCOTT RESIDENCE TRUST (SGX:A68U) OUE COMMERCIAL REIT (SGX:TS0U) FRASERS HOSPITALITY TRUST (SGX:ACV)

Singapore Hotels - Sorry We Are Full!




What’s New


Stronger performance in August 2019 after a subdued 1H19

  • Based on the latest STB statistics, Singapore hospitality showed stellar performance in the month of August 2019 as revenue per available room (RevPAR) spiked up by 4.9% y-o-y to almost S$200 per room. This follows a 2.3% y-o-y increase in July 2019. For YTD August 2019, RevPAR was relatively flat y-o-y at S$189.
  • The increase was led by all categories of hospitality, especially Economy (+9.6% y-o-y), Upscale (+7.0% y-o-y) and Mid-tier (+6.1% y-o-y). The Luxury category continues to be strong with August 2019 RevPAR up 2.1% y-o-y after a 1.7% y-o-y rise in July 2019.
  • For YTD August 2019, RevPAR for Luxury, Mid-Tier and Economy hotels were up 1.4%, 1.5% and 1.1% y-o-y respectively to S$398, S$150 and S$90 while Upscale category fell 0.7% y-o-y to S$225.
  • The stronger RevPAR performance for the overall industry in August 2019 was underpinned by 3.1% and 5.2% y-o-y increases in visitor arrivals and total visitor days respectively. The strong tourist arrivals were mainly from Indonesia (+4.7% y-o-y), China (+4.4%), Japan (7.6%) and Korea (+4.6%). We note that tourists from Americas (US, Canada and others) saw strong growth of 17.2% albeit from a smaller base.
  • The worst-performing countries include Hong Kong (-6.6% y-o-y) and Malaysia (-3.2% y-o-y).
  • August 2019 occupancy rate increased 0.8ppt y-o-y to 92.5%. While occupancy rates are seasonally the strongest in the month of July and August, we note that in both months this year, the figures were higher y-o-y (July 2019 +1.4ppts y-o-y to 93.9%).


Our thoughts

  • We believe the strong performance in the hospitality sector in July-August 2019 was mainly contributed by a regional boost arising from some redirection of tourists into Singapore.
  • The strong RevPAR performance in July 2019 and August 2019, especially for the Upscale and Mid-tier categories indicate potential upside to 3Q19 results for the Singapore-focused hospitality REITs CDL HOSPITALITY TRUSTS (SGX:J85) and FAR EAST HOSPITALITY TRUST (SGX:Q5T).
  • We had originally pencilled in a 2-3% improvement in RevPAR for FY19, above the current YTD August 2019 flattish RevPAR performance of 0.4%. However, the hospitality REITs may be able to meet expectations if the strong RevPAR performance continues in 4Q19.
  • We believe there will be increased interests in the hospitality REITs (excluding ASCOTT RESIDENCE TRUST (SGX:A68U) and ASCENDAS HOSPITALITY TRUST (SGX:Q1P)), which have underperformed the other REITs sectors, should the Singapore hospitality sector continue to perform strongly until the end of the year.
  • We maintain our BUY calls on ASCOTT RESIDENCE TRUST (Target Price S$1.45), CDL HOSPITALITY TRUSTS (Target Price S$1.80) and the newly merged OUE COMMERCIAL REIT (SGX:TS0U) (Target Price S$0.60).
  • For FAR EAST HOSPITALITY TRUST (SGX:Q5T) and FRASERS HOSPITALITY TRUST (SGX:ACV), we have a HOLD call with Target Price of S$0.70 and S$0.77 respectively owing to near-term pressure on their DPU from supply pressures in Sydney.
  • Furthermore, stocks such as CDL HOSPITALITY TRUSTS and FRASERS HOSPITALITY TRUST have potential NAV upside from potential asset disposals. Should they decide to dispose of Novotel Liang Court as part of the redevelopment of the overall Liang Court mixed development site, CDL HOSPITALITY TRUSTS could crystallise 20% upside for the property.





Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2019-10-09
SGX Stock Analyst Report BUY MAINTAIN BUY 1.800 SAME 1.800
HOLD MAINTAIN HOLD 0.700 SAME 0.700
BUY MAINTAIN BUY 1.450 SAME 1.450
BUY MAINTAIN BUY 0.600 SAME 0.600
HOLD MAINTAIN HOLD 0.770 SAME 0.770



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