SINGAPORE (Apr 21): The Covid-19 outbreak in Singapore has significantly affected the country’s tourism industry. As such Singapore hotel REITs are trading below replacement cost, at around 0.5 to 0.6 times price-to-book ratio, at -2 standard deviation (SD) of their 10-year mean.

On an enterprise value (EV)/room basis, DBS Group Research found that all four S-REITs trade at an implied valuation/room of $0.5-1.2 million/room, with CDL Hospitality Trusts (CDLHT) and Far East Hospitality Trust (FEHT) the lowest at less than $0.6 million/room. This is even cheaper than recently transacted land costs for hotel sites in recent years.

“If hotel S-REITs continue to trade at such low valuations, we believe that their sponsors may consider taking them private given that most have not been active in raising capital and/or recycling assets,” says analyst Derek Tan.

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