OCBC keeps 'overweight' on Singapore hospitality sector as REITs rally

OCBC keeps 'overweight' on Singapore hospitality sector as REITs rally

By: 
Michelle Zhu
07/02/19, 12:20 pm

SINGAPORE (Feb 7): OCBC Investment Research is maintaining “overweight” on Singapore’s hospitality space as the sector’s REITs – namely CDL Hospitality Trusts (CDL HT), Ascott Residence Trust (ART) and Far East Hospitality Trust (FEHT) – rally into the new year with total returns of +5.7%, +2.5% and +6.5%, respectively.

In a Thursday report, analyst Deborah Ong attributes the recent rally to three catalysts, namely: favourable operational outlooks by the three REITs on RevPAR growth; expectations of a pause in the Fed rate hike; and recent hospitality transactions conducted at rich valuations versus valuations of comparable assets on balance sheets.

In particular, Ong has highlighted OUE Hospitality Trust as OCBC’s top “buy” pick with a fair value estimate of 82 cents. At the unit price of 69 cents, its FY19F dividend yield of 7.1% is 70 bps and 150 bps over that of FEHT’s and CDL HT’s, respectively.

“OUE HT is one of only two SG-only hospitality REITs, and we expect the REIT’s assets to benefit from the benign hotel room supply situation locally. In addition, we expect RevPARs at Crowne Plaza Changi Airport to be boosted when Jewel Changi Airport opens in 1H19, while OUE HT’s key asset Mandarin Orchard Singapore looks to benefit from the proposed plans to rejuvenate Orchard Road, which were announced recently,” explains Ong.  

FEHT and ART have also been rated “buy” with fair value estimates of 67.5 cents and $1.25, respectively. OCBC likes the former for its SG-hospitality focus and undemanding valuations, as well as the latter for its successful capital recycling and a defensive portfolio of high-quality assets.

Meanwhile, the research house remains cautious on the outlook of CDL HT on the belief that its 1Q19 earnings may be dragged down by the closure of its Maldives resort, Dhevanafushi Maldives Luxury Resort (DMLR).

The trust is rated “hold” and has a fair value estimate of $1.56.

“We believe it is possible that the Maldives resort may continue to be a drag even after its opening in early 2Q19, given that the asset will need time to ramp up occupancy. That said, we do recognize CDL HT as another beneficiary of the SG hospitality upturn and continue to monitor the stock for a more compelling entry,” says Ong.

Units in CDL HT, ART, FEHT and OUE HT last traded at $1.67, $1.17, 66 cents and 71 cents before the midday trading break.

UOB and KrisFlyer launch credit card for pairing with savings account to earn air miles from spending

SINGAPORE (Apr 23): United Overseas Bank (UOB) and KrisFlyer have launched the KrisFlyer UOB Credit Card. This is a credit card which can be combined with a savings account to earn bonus KrisFlyer miles when customers spend and save. With the KrisFlyer UOB Credit Card, cardmembers will earn three KrisFlyer miles on their everyday spending, such as on dining and online food delivery, online shopping and public transport. KrisFlyer is Singapore Airlines Group’s frequent flyer programme. According to UOB and KrisFlyer, these everyday spend categories were chosen as they were the fas....
Read More >>

ComfortDelGro deepens footprint in Australia with A$28.3 mil bus acquisition

SINGAPORE (Apr 23): ComfortDelGro Corporation announced Tuesday it is acquiring Australian bus service operator B&E Blanch for A$28.3 million ($27.5 million). B&E Blanch, which has a fleet of 48 buses and coaches, runs scheduled route and school bus services in New South Wales (NSW). The company operates as Blanch’s Bus Company and Brunswick Valley Coaches. The latest acquisition is ComfortDelGro’s sixth acquisition in Australia in the last 12 months, and its fifth in NSW. ComfortDelGro says the purchase consideration, which is approximately 7.6 times EBITDA, will be ....
Read More >>

UIC posts 35% higher 1Q earnings of $81 mil on higher contribution from associated companies

SINGAPORE (Apr 23): United Industrial Corporation (UIC) declared earnings of $81.1 million for 1Q19, 35% higher than $60.2 million in 1Q18. This came on the back of a 12% increase in revenue to $185.3 million from $165.7 million a year ago, mainly due to higher sales of trading properties with higher sales achieved for the group’s residential development projects; higher contribution from investment properties; and higher contribution from information technology operations. The group’s hotel operations remained stable. As cost of sales also increased by 17% y-o-y to $105.5 million, g....
Read More >>