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Not 'too late' to get in on hospitality rebound action for S-REITs in 2023: CGS-CIMB

Bryan Wu
Bryan Wu • 3 min read
Not 'too late' to get in on hospitality rebound action for S-REITs in 2023: CGS-CIMB
Analysts say CLAS will benefit from China’s reopening as Chinese tourists account for 15% to 30% of tourists in four out of eight of its key markets. Photo: CLAS
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CGS-CIMB Research analysts are keeping “overweight” on the property sector in Singapore as the hospitality industry prepares for a “big rebound”.

In their report dated Jan 18, analysts Lock Mun Yee and Natalie Ong note that international visitor arrivals (IVA) reached 6.3 million in 2022, beating the Singapore Tourism Board’s (STB) estimates of 6 million, and formed 33% of 2019’s IVA.

In the past four months, IVA formed 53% to 54% of 2019 levels, while tourism receipts for 9M2022 came in at $9 million, forming 44% of 9M2019 levels. According to STB, IVA in 2023 and tourism receipts are expected to recover to 63% to 73% and 65% to 76% of 2019 levels.

The analysts say that STB’s forecast of IVA doubling y-o-y to 12 million to 14 million in 2023 with full recovery expected by 2024, is largely in line with their 12 million to 16 million 2023 IVA forecast. They note that STB estimates tourist receipts of $14 billion and $18 billion to $21 billion for 2022 and 2023, approximately 51% and 65% to 76% of 2019 levels respectively.

On this, Lock and Ong believe this newsflow could provide some support for hospitality S-REITs given that Singapore accounts for 100%, 66% and 17% of the assets under management (AUM) of Far East Hospitality Trust (FEHT), CDL Hospitality Trust (CDLHT) and CapitaLand Ascott Trust (CLAS) respectively. At their current share price levels, the analysts also deem that it is “not too late to get in on the action”.

Their picks for the sector in order of preference are CLAS, FEHT and CDLHT, with target prices (TPs) of $1.25, 73 cents and $1.30 respectively.

See also: OCBC increases Boustead Singapore’s TP to $1.47 after ‘stellar’ FY2024 results

On CLAS, their top pick in the sector, they say: “Despite its geographically diversified portfolio, CLAS will benefit from China’s reopening as Chinese tourists account for 15% to 30% of tourists in four out of eight of its key markets while its extended stay rental housing and student accommodation assets continue to provide income visibility owing to their high occupancies and single-digit rental growth.”

Meanwhile, CDLHT’s share price growth of 30% in the past three months has outperformed the 20% growth of its peers, leaving limited upside to their valuation. “We recommend Singapore-focused FEHT as an alternative to ride the expected rebound in Singapore’s hospitality sector. Downside risks include new lockdown/restrictions, a recession situation which may reduce travel demand and hotel/airline operational constraints limiting tourist numbers,” they say.

Notable events slated for 2023 include the Sail Grand Prix (SailGP) and Art SG, Southeast Asia’s largest art fair, which took place earlier in January, and new events, such as the Olympic Esports Week and Professional Triathletes Organisation Asian Open.

See also: CGS International increases Yangzijiang Shipbuilding TP to $2.35, ups order book win target to US$5.5 bil

According to STB, as of September 2022, Singapore’s tourism workforce stood at 65,000 or about 78% of 2019 levels, with hiring efforts aimed to fill an estimated 3,000 job vacancies in the tourism sector over the next one to two years.

As at 11.37am, units in CLAS, FEHT and CDLHT were trading at $1.07, 64.5 cents and $1.31 respectively.

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