While Phillip Securities continues to favour First Sponsor Group, the brokerage believes the property company’s low occupancy rate at its European hotel could impact its top line.
Phillip Securities says it expects “some” mark-downs in the fair value of the hotels at this year-end.
This could see shave off $1.8 million from its revenue given a 3% decline in the fair value of the hotel investment properties.
“As the number of Covid-19 cases in Europe continues to spike, we are less optimistic on its European hotels, even for the ones located away from cities,” Phillip Securities analyst Tan Jie Hui writes in a note dated Oct 28.
According to the brokerage, the occupancy rate at its Bilderberg Bellevue Hotel Dresden is currently at the low 60%-70% range.
This is down from its previous daily occupancy rate of mid-70% to high-90% as the hotel benefitted from being in the countryside.
The occupancy levels at First Sponsor’s key Amsterdam and Rotterdam hotels are also at low teens on good days and low single digits on other days, the brokerage points out.
These hotels would be affected when subsidies from the government dwindle in the coming months, adds the brokerage.
Still, Phillip Securities has maintained its “buy” rating for First Sponsor with a revised target price of $1.56.
As at 1.43 pm, First Sponsor was up 2 cents or 1.6% at $1.30 with 6,700 shares changed hands.
