Pfizer’s announcement of favourable phase 3 data on its Covid-19 vaccine which is ‘more than 90% effective' is definitely a good news for the hospitality sector, and this was reflected in the strong share price performance of hospitality names last week.

While the situation in Europe and the U.S. remains uncertain with the resurgence of Covid-19 cases, we believe ART’s focus on corporate and long-stay serviced residences could provide a buffer to the fall in occupancy and room revenue.

In addition, ART’s geographically diversified portfolio with 68% of its assets in the Asia Pacific region could benefit from the earlier recovery given the more stabilised infection rates in the region.

ART remains our top pick within the hospitality sector given its highly geographically diversified portfolio of high quality assets amidst the ongoing macroeconomic uncertainties, focus on long-stay serviced residences and strong balance sheet.

Factoring in the development on vaccines, we increase our DPU forecast for FY21 by 6% and FY22-24 by 3% while decreasing our cost of equity assumption from 8.3% to 7.3% to account for the improved sentiment and outlook.

Our fair value estimate hence increases from S$0.97 to S$1.20. BUY.

Source: OCBC Research - 16 Nov 2020