UOB Kay Hian Research analyst Jonathan Koh maintains an ‘overweight’ rating, with recommendations to “buy” Ascott Residence Trust (ART), CDL Hospitality Trust (CDLHT) and Far East Hospitality Trust (FEHT).
He has given them target prices of $1.29, $1.45 and 76 cents respectively.
“We have weathered the Covid-19 pandemic for two years already. During this time, the speed of detecting new variants has accelerated, and effective vaccines and anti-viral drugs, such as Pfizer Paxlovid have been developed,” says Koh in his Feb 22 report. “Bookings for hotels and serviced residences are expected to pick up as the overcast from the Omicron variant fades as well.”
Singapore also has one of the highest vaccination rates in the world, where Singaporeans overcame vaccine hesitancy and are well adapted to living with Covid-19 as an endemic.
As of 19 Feb 2022, 92% of the total population had completed their full regimen and received at least two doses of Covid-19 vaccines, of which 66% have received their booster shots, according to Koh.
Moreover, Singapore has reinstated its daily vaccinated travel lane (VTL) air quota back to 15,000 and should benefit from a gradual pick-up in meetings, incentives, conferences and exhibitions (MICE) events.
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“We expect resumption of reopening with expansion of capacity for existing VTLs and introduction of new VTLs by 2QFY2022,” says Koh.
For ART, 2HFY2021 distribution per unit (DPU) dropped 14 % y-o-y to 2.27 cents. The results included distribution of divestment gains of $25 million, says the analyst.
“ART recognised revaluation gains of $147.3 million for properties located in Australia, France, Japan, the UK and the US, says Koh. “Net asset value (NAV) per unit increased 3.5% y-o-y to $1.19.”
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According to Koh, ART also divested six properties at an average exit yield of 2% and total proceeds of $580 million. The capital freed up was reinvested in 11 yield-accretive rental housing and student accommodation properties for total consideration of $780 million and an average EBITDA yield of 5%.
For CDLHT, its DPU for the 2HFY2021 dropped 11% y-o-y to 3.06 cents. The results included partial distribution of proceeds from divestment of Novotel Clark Quay and Novotel Brisbane of $12.5 million, says Koh. “On a same-store basis, valuation of its investment properties increased 1% or $26.8 million. NAV per unit increased 0.8% y-o-y to $1.33.”
For FEHT, DPU for the 2HFY2021 dropped 10.9% y-o-y to 1.53 cents. The results included undistributed taxable income from previous period of $3.5 million. “FEHT recognised gain in fair value of investment properties of $77 million mainly from Central Square. NAV per unit increased 5.1% y-o-y to $0.83,” Koh says.
Both hotels and serviced residences segments saw recovery due to the easing of border restrictions and introduction of VTLs, where the average daily rate improved 23% q-o-q to $81 due to the shift towards corporate business and leisure travel, including staycations.
Some risks that the analyst notes include new variants of Covid-19 that could be more transmissible and virulent.
