S-REITs Bi-Weekly - UOB Kay Hian 2020-09-02: Recovery Plays Among The Top Gainers

S-REITs - UOB Kay Hian Research  | SGinvestors.io FAR EAST HOSPITALITY TRUST (SGX:Q5T) FRASERS HOSPITALITY TRUST (SGX:ACV)

S-REITs Bi-Weekly - Recovery Plays Among The Top Gainers



WHAT HAPPENED LAST 2 WEEK (16-31 Aug 20)


UOBKH S-REIT Index gained marginally by 0.3% to 247.4 in the past two weeks.

  • Singapore has started the process of gradually re-opening its borders. We have lifted border restrictions to travellers from Brunei and New Zealand where their COVID-19 situations are assessed to be well under control and risk of importation is low. With effect from 1 Sep 20, travellers who stayed in Brunei and New Zealand in the last 14 consecutive days will not be required to serve the Stay Home Notice (SHN). However, they have to apply for an Air Travel Pass (ATP) and undergo COVID-19 test upon arrival at Changi Airport.

Top outperformers:


Top underperformers:



SPOTLIGHT – Hospitality REITs


More reciprocal green lanes on the way.

  • Currently, Singapore has reciprocal green lane arrangements for visitors on business and official trips from China and Malaysia, where travellers are subjected to COVID-19 swab tests 48 hours before departure and upon arrival. Singapore is also working to establish green lane arrangements for essential travel with Japan, including a special quota for work pass holders and a reciprocal green lane for short-term business trips, to be finalised by September.

Extending green lanes to tourists.

  • Singapore will introduce the reciprocal green lane for tourists from countries where the COVID-19 situation is similar to or better than Singapore. Leisure travellers from these countries will be exempted from the 14-day quarantine. The Ministry of Transport estimated that including transfer-transit traffic, these safer countries account for about 40% of our pre-COVID-19 passenger volumes at Changi Airport. The government will consider replacing the 14-day isolation, which is a deterrent to travellers, with a rigorous testing regime.

Slight easing in duration of quarantine.

  • The government has also shortened the SHN duration from 14 days to 7 days for travellers from other low-risk countries and regions, such as Australia (excluding Victoria state), Macao, China, Taiwan, Vietnam and Malaysia. The COVID-19 test will be administered before the end of the 7-day SHN.

Re-opening while keeping COVID-19 transmission at bay.

  • Singapore has to gradually re-open its borders so as to maintain Changi Airport’s hub status. The challenge is to restore passenger volume, while keeping virus transmission under control.
  • BUY Far East Hospitality Trust (Target: S$0.58) and Frasers Hospitality Trust (Target: S$0.54). Both stocks trade at an attractive discount of almost 40% to NAV.


Far East Hospitality Trust (SGX:Q5T) (BUY/ Target Price: S$0.58)


Rewarded with fixed rents while waiting for recovery.


Business mix for hotels shifted to government contracts.

  • Far East Hospitality Trust improved its hotel occupancy by 24.6ppt q-o-q to 89.9% in 2Q20 due to contracts from government agencies for isolation purposes and companies that required their Malaysian workers to be housed in Singapore. Occupancy for its serviced residences remained high at 81.8% due to longer leases from corporate accounts.

Trading at 36% discount to NAV.



Frasers Hospitality Trust (SGX:ACV) (BUY/ Target Price: S$0.54)


Riding on domestic travel in Australia and the UK.

  • Frasers Hospitality Trust (SGX:ACV) provides a geographically diversified exposure with 15 quality properties across nine key gateway cities in Asia, Australia and Europe. We see potential for recovery in domestic travel in Australia (36% of NPI) and the UK (16% of NPI). In particular, the UK has established travel corridors which will usher in tourists, especially from continental Europe.

Six properties in the UK have re-opened.

  • Frasers Hospitality Trust’s properties in Australia, Japan (12% of NPI) and the UK will recover sooner as these countries have sizeable domestic travel markets. All but two of Frasers Hospitality Trust’s properties have resumed business operations (all hotels in the UK and Malaysia were closed in 3QFY20). ibis Styles London Gloucester Road is expected to re-open in mid-August.

Trading at 38% discount to NAV.






Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-09-02
SGX Stock Analyst Report BUY MAINTAIN BUY 0.58 DOWN 0.620
BUY MAINTAIN BUY 0.540 SAME 0.540



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