Singapore Hospitality REITs - OCBC Investment 2019-12-26: RevPAR Recovery Gains Traction

Singapore Hospitality REITs - OCBC Investment | SGinvestors.io CDL HOSPITALITY TRUSTS (SGX:J85) ASCOTT RESIDENCE TRUST (SGX:A68U) FAR EAST HOSPITALITY TRUST (SGX:Q5T)

Singapore Hospitality REITs - RevPAR Recovery Gains Traction

  • Stronger leisure travel market.
  • 2020 looking to be a good year.
  • ASCOTT RESIDENCE TRUST is our top hospitality REIT pick.



Singapore Hospitality REITs

  • Out of the three hospitality REITs under our coverage, all of them reported an in-line set of 3Q19 results. DPU performances, however, were mixed, with negative y-o-y DPU growth for CDL HOSPITALITY TRUSTS (SGX:J85) (- 4.1%) and FAR EAST HOSPITALITY TRUST (SGX:Q5T) (-1.0%) while ASCOTT RESIDENCE TRUST (SGX:A68U) recorded +5% y-o-y DPU growth.
  • 3Q19 SG RevPAR showed signs of improvement with better performances seen from SG Serviced Residences segment, driven by stronger leisure travel demand. Looking at the sector as a whole, we expect RevPAR pickup in 4Q19 and 2020.
  • Our top pick is ASCOTT RESIDENCE TRUST [BUY; Fair Value: S$1.41]. We like ASCOTT RESIDENCE TRUST’s geographically diversified portfolio of high quality assets, and view its defensive positioning favourably, given the still uncertain macroeconomic environment.


DPU recap: Mixed bag for hospitality REITs under coverage



Better performances supported by stronger leisure travel demand

  • As expected, 3Q19 SG hotels RevPAR figures saw an improvement from 1H 2019, supported by stronger leisure travel market.
  • CDL HOSPITALITY TRUSTS’s 3Q and 9M19 RevPAR growth came in at 4.9% and 0.4% y-o-y, on the back of higher occupancy and room rate. For FAR EAST HOSPITALITY TRUST, 3Q RevPAR growth was flat while 9M19 RevPAR fell 1.5% y-o-y, dragged by weaker corporate travel demand. Separately, SG Serviced Residences (SR) continued to perform in 3Q. FAR EAST HOSPITALITY TRUST’s 3Q and 9M19 SR RevPAU grew by 5.7% and 3.0% y-o-y respectively, largely due to a growth in shorter-stay bookings at higher room rates while ASCOTT RESIDENCE TRUST posted a 2%/8% y-o-y growth in 3Q/9M19 RevPAU.


Unlocking portfolio values

  • Recall that ASCOTT RESIDENCE TRUST will join the consortium led by CITY DEVELOPMENTS (SGX:C09) and CAPITALAND (SGX:C31) to redevelop the Liang Court Site with a partial sale of 15,170 square metres of Somerset Liang Court Singapore’s GFA to CITY DEVELOPMENTS for S$163.3m. ASCOTT RESIDENCE TRUST will redevelop the retained GFA of 13,034 square metres with a fresh 99 years leasehold into a new Somerset serviced residence with a hotel license using the net proceeds from the partial sale of land.
  • Meanwhile, CDL HOSPITALITY TRUSTS announced the proposed redevelopment transaction which involves the
    1. divestment of Novotel Singapore Clarke Quay (NCQ) at Liang Court Site;
    2. forward purchase of a brand new, lifestyle hotel at redeveloped Liang Court Site from a subsidiary of CITY DEVELOPMENTS; and also the proposed acquisition of W Singapore – Sentosa Cove (W Hotel).
  • We see these transactions as largely positive for ASCOTT RESIDENCE TRUST and CDL HOSPITALITY TRUSTS’s long-term growth which should support DPU growth visibility.


Expecting a brighter 2020

  • According to data from Singapore Tourism Board (STB), YTD Oct 2019 international visitor arrivals increased by 2.3% y-o-y to 15.9m while RevPAR was up 1.2% y-o-y. We expect to see RevPAR pickup in 4Q19 and 2020. Hotel room supply in Singapore is benign at a lower CAGR of 1.3% for the next 4 years.
  • While demand from corporate travel is likely to remain soft amidst economic uncertainties, we expect demand from leisure travel to remain healthy, driven by biennial and a number of inaugural events in Singapore in 2020.


Ascott Residence Trust our top pick






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2019-12-26
SGX Stock Analyst Report BUY MAINTAIN BUY 1.690 SAME 1.690
BUY MAINTAIN BUY 1.410 SAME 1.410
HOLD MAINTAIN HOLD 0.680 SAME 0.680



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