DBS Group Research is continuing to remain “constructive” on the hospitality Singapore REITs (S-REITs) sub-sector for 2022.

“We believe that the prospects of a revenue per average room (RevPAR)-led recovery in distributions per unit or DPUs (+30% in FY2022) will likely outweigh worries about higher interest costs impacting the sector,” the team writes.

In addition, the hospitality S-REIT sub-sector has seen one of its best days in the year on the back of positive news pertaining to Singapore’s re-opening.

As at the team’s note dated April 14, CDL Hospitality Trusts (CDLHT) saw its shares increase by 4%, while shares in Far East Hospitality Trust (FEHT) and Frasers Hospitality Trust (FHT) rose by 6.3% and 7.6% respectively.

Shares in Ascott Residence Trust (ART) remained flat.

<span class='see_also_inread'><b>See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='https://www.theedgesingapore.com/capital/brokers-calls/stars-re-aligning-hospitality-s-reits-sub-sector-art-cdlht-and-feht-being?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Stars 're-aligning' for hospitality S-REITs sub-sector with ART, CDLHT and FEHT being analysts' top picks</a></b></span>

“The strong rally in prices built on the positive momentum seen in March where the hospitality S-REITs posted a 14% rise (m-o-m) ahead of the 5% rise in the S-REIT index. On a year-to-date (y-t-d) basis, the hospitality S-REITs are up 17%,” notes the DBS team.

In its March 25 report, the team had already highlighted that hospitality S-REITs are poised for a multi-year rebound in share price driven by critical factors including the strong corelation between RevPAR and higher P/NAV, as well as a write-back in Covid-related write-offs in NAVs (especially for SG hotels).

The hospitality S-REITs subsector is still currently trading at attractive valuations, says the team.

“The recent news of FHT undertaking a strategic review with a possibility of a privatisation in place has probably highlighted the cheap valuations that the hospitality S-REITs trade at,” writes the team. “Even with the re-rating in prices, the hospitality S-REITs still trade at close to -1 standard deviation of its historical P/NAV ratio”.

Units in CDLHT, FEHT, FHT and ART closed at $1.30, 67.5 cents, 63 cents and $1.11 respectively on April 14.

DBS remains positive on hospitality S-REITs as RevPAR-led recovery in DPUs to outweigh higher interest cost worries

Singapore — regional re-exporter of capital investments

Broker's Digest: Wing Tai Holdings, Keppel DC REIT, Del Monte, DFI Retail, ComfortDelGro

No sustained recovery yet for banks and financial institutions 

Three-quarters of Singaporeans answered scam calls recently: Toku  

Businesses in Singapore eager to hire international talent with the rise of remote work

Putting consumer safety at the forefront of every retailer's agenda

DBS remains positive on hospitality S-REITs as RevPAR-led recovery in DPUs to outweigh higher interest cost worries

Related Stories

Highlights

Powell says US economy in strong shape, Fed can avert recession

Related Stories

DBS slashes Nanofilm's TP to $3.70 with dampened demand in near-term

CEREIT assets benefitting from positive fundamentals in key office and logistics markets: PhillipCapital

DBS suspends coverage of Bukit Sembawang Estates; keeps 'buy'