SINGAPORE (Feb 28): Since the start of the year, hospitali­ty trusts are the poorest-performing sector, followed by retail. In fact, on a non-weighted basis, all S-REITs are down year-to-date. The hospitality trusts are of course dragged down by low occupancy as a result of Covid-19.

While Eagle Hospitality Trust is the worst performer year-to-date, it is interesting that in the US, it is increasingly apparent that the supply of select-service hotels is rising while demand has not kept pace with supply. ARA US Hospitality Trust is down just 8% this year following a sharp sell-off on Feb 27, but its annualised yield has compressed be­cause distributions per security (DPS) were more than 12% lower than the forecast in 4QFY2019. If its yield were to expand to match the aver­age yield of the sector, its price could de­cline. Furthermore, to raise DPS, it may need an acquisition.

Singapore-focused Far East Hospitali­ty Trust is down as well, but the supply-de­mand situation in Singapore is caused by a temporary collapse in demand. During Over­sea-Chinese Banking Corp’s results briefing, CEO Samuel Tsien said he expects the Singa­pore economy to rebound from the impact of Covid-19 by 4Q2020. If so, Singapore-focused hospitality trusts should similarly rebound.

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