SGX Stocks and Warrants

Author: kimeng   |   Latest post: Mon, 22 Jan 2018, 09:36 AM


SG Hospitality: Strong Visitor Growth Numbers Clocked in Oct

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Visitor arrivals increased 13.0% YoY in Oct 2017, and 5.8% YoY for the Jan-Oct 2017 period. Correspondingly, visitor days increased 10.9% YoY in Oct 2017 and 4.2% YoY for the Jan-Oct period.

Singapore Tourism Board’s (STB) Oct data showed that industry-wide RevPAR increased 1.8% YoY for luxury hotels, 3.2% YoY for upscale hotels, 3.6% YoY for mid-tier hotels, and 13.0% YoY for economy hotels. In addition, given the strong growth in passenger movements at Changi Airport in Nov, we expect overall visitor arrivals in Nov to be robust.

With the strong numbers expected for at least 2/3 of the fourth quarter, there may be a slight upside surprise to our FY17F DPU forecasts for hospitality REITs with significant exposure to Singapore: OUE Hospitality Trust, Far East Hospitality Trust, CDL Hospitality Trusts. We are nonetheless wary of the tight yields that several of the hospitality REITs under our coverage trade at – a range of 5.5% to 5.9% FY18F yield based on Bloomberg consensus forecasts.

S-REITs, across multiple sub-sectors including hospitality, are trading at a yield spread of 350 bps, 2 standard deviations below its five-year mean. While we do see some room for operational upside for SG-based hospitality REITs in 2018, there does not appear to be a sufficient margin of safety for investors at current unit prices.

We maintain NEUTRAL on the sector.

Source: OCBC Research - 11 Jan 2018

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