Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/capitaland-integrated-commercial-trust" target="_blank" data-smartkarma-citation="entities:105" rel="noopener">Capitaland Integrated Commercial Trust (CICT SP)</a> 2H21 DPU -8.9% YoY; Office cap rates compressed while retail rental reversions improving   </li><li><a href="https://www.smartkarma.com/entities/mapletree-north-asia-commercial-trust" target="_blank" data-smartkarma-citation="entities:5127" rel="noopener">Mapletree North Asia Commercial Trust (MAGIC SP)</a> 3Q22 Business Updates – High occupancies a priority against falling reversions</li><li><a href="https://www.smartkarma.com/entities/ascott-residence-trust" target="_blank" data-smartkarma-citation="entities:6560" rel="noopener">Ascott Residence Trust (ART SP)</a> 2H21 DPU +14% YoY; RevPAU rebounded strongly with plenty of growth initiatives in the pipelines</li></ul>

Capitaland Integrated Commercial Trust (CICT SP) 2H21 DPU -8.9% YoY; Office cap rates compressed while retail rental reversions improving   Mapletree North Asia Commercial Trust (MAGIC SP) 3Q22 Business Updates – High occupancies a priority against falling reversionsAscott Residence Trust (ART SP) 2H21 DPU +14% YoY; RevPAU rebounded strongly with plenty of growth initiatives in the pipelines

ASEAN Builder's Scoop (28Jan22) - CICT Office Cap Rates Compressed

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

Frasers Hospitality Trust / Equity Bottom-Up

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h3>Initiating Coverage</h3>
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<h2>Frasers Hospitality Trust</h2>
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<h3>COMPANY DESCRIPTION</h3>
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<p>Frasers Hospitality Trust and its subsidiaries (collectively defined herein as FHT) is a hotel and serviced residence trust. FHT focuses on investing globally on a long-term basis, directly or indirectly, in a diversified portfolio of income-producing real estate and real estate-related assets used primarily for hospitality purposes. Its segments include Singapore, Australia, Malaysia, Japan, UK and Germany. As at 29 October 2021, FHT’s portfolio includes 14 properties: eight hotels and six serviced residences.</p>
<h3>SUMMARY</h3>
<p>For the financial year ended 30 September 2021 (FY2021) FHT recorded revenue of S$85.5 million, a decrease of 3.4% from S$88.6 million over the same period a year ago. Net property income (NPI) also decreased by 3.7% from S$59.8 million in FY2020 to S$57.6 million in FY2021. The better performance in the first 5 months of FY2020 partially mitigated the adverse impact of the Covid-19 outbreak, whilst the performance for the entire period of FY2021 continued to be impacted by the Covid-19 pandemic which resulted in the decline in revenue and NPI in FY2021. With lower NPI and payment of management fees in cash, income available for distribution attributable to Stapled Securityholders decreased by 29.7% year on year (yoy) to S$18.9 million. Further, FHT distributed 90% of its distributable income in FY2021. This led to a distribution per Stapled Security (DPS) of 0.98 cents for FY2021. During the period, FHT reported total return after tax of S$16.3 million. Consequently, total return after tax attributable to Stapled Securityholders amounted to S$13.6 million for FY2021, translating to an earnings per Stapled Security of 0.70 cents. In October 2021, FHT divested Sofitel Sydney Wentworth for S$309.1million. The net proceeds and net gain from the divestment are estimated to be S$277.2 million and S$23.7 million respectively.</p>
<h3>RECOMMENDATION</h3>
<p>Based on the adjusted NAV of S$0.66, FHT currently has a P/B multiple of 0.72x and is trading at a discount of approximately 28% to NAV. Our peer comparison results show that FHT could be undervalued, given a lower P/B of 0.72x compared to its peer average P/B of 0.83x. Adopting a relative valuation approach, we estimate a target price of S$0.548 if FHT’s P/B were to adjust to the peer average P/B of 0.83x. This target price is a 15.37% upside from the current share price of S$0.475. We believe this upside could be justified by the potential recovery in FHT’s earnings as supported by the rising vaccination rates globally and the easing of international borders. Further, the divestment of Sofitel Sydney Wentworth would also increase FHT’s financial flexibility to fund future acquisition or would allow FHT to enhance the returns for its Stapled Securityholders. Given the above, we believe a buy recommendation is warranted on FHT.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




Initiating Coverage


Frasers Hospitality Trust




COMPANY DESCRIPTION




Frasers Hospitality Trust and its subsidiaries (collectively defined herein as FHT) is a hotel and serviced residence trust. FHT focuses on investing globally on a long-term basis, directly or indirectly, in a diversified portfolio of income-producing real estate and real estate-related assets used primarily for hospitality purposes. Its segments include Singapore, Australia, Malaysia, Japan, UK and Germany. As at 29 October 2021, FHT’s portfolio includes 14 properties: eight hotels and six serviced residences.
SUMMARY
For the financial year ended 30 September 2021 (FY2021) FHT recorded revenue of S$85.5 million, a decrease of 3.4% from S$88.6 million over the same period a year ago. Net property income (NPI) also decreased by 3.7% from S$59.8 million in FY2020 to S$57.6 million in FY2021. The better performance in the first 5 months of FY2020 partially mitigated the adverse impact of the Covid-19 outbreak, whilst the performance for the entire period of FY2021 continued to be impacted by the Covid-19 pandemic which resulted in the decline in revenue and NPI in FY2021. With lower NPI and payment of management fees in cash, income available for distribution attributable to Stapled Securityholders decreased by 29.7% year on year (yoy) to S$18.9 million. Further, FHT distributed 90% of its distributable income in FY2021. This led to a distribution per Stapled Security (DPS) of 0.98 cents for FY2021. During the period, FHT reported total return after tax of S$16.3 million. Consequently, total return after tax attributable to Stapled Securityholders amounted to S$13.6 million for FY2021, translating to an earnings per Stapled Security of 0.70 cents. In October 2021, FHT divested Sofitel Sydney Wentworth for S$309.1million. The net proceeds and net gain from the divestment are estimated to be S$277.2 million and S$23.7 million respectively.
RECOMMENDATION
Based on the adjusted NAV of S$0.66, FHT currently has a P/B multiple of 0.72x and is trading at a discount of approximately 28% to NAV. Our peer comparison results show that FHT could be undervalued, given a lower P/B of 0.72x compared to its peer average P/B of 0.83x. Adopting a relative valuation approach, we estimate a target price of S$0.548 if FHT’s P/B were to adjust to the peer average P/B of 0.83x. This target price is a 15.37% upside from the current share price of S$0.475. We believe this upside could be justified by the potential recovery in FHT’s earnings as supported by the rising vaccination rates globally and the easing of international borders. Further, the divestment of Sofitel Sydney Wentworth would also increase FHT’s financial flexibility to fund future acquisition or would allow FHT to enhance the returns for its Stapled Securityholders. Given the above, we believe a buy recommendation is warranted on FHT.















(Non-SGX Report) Initiating Coverage - Frasers Hospitality Trust

<h2>Singapore</h2><h3>SREITs results in a glance (see detailed spreadsheet and calendar attached)</h3><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/238/456/original/image_76502934321635528996334.png?1635528999" class="editor-image img-responsive" data-smartkarma-image-id="238456"></figure><h3><a href="https://www.smartkarma.com/entities/starhill-global-reit" target="_blank" data-smartkarma-citation="entities:10791" rel="noopener">Starhill Global REIT (SGREIT SP)</a> 1Q22 Business Updates; Little help from VTL leading up to festive season</h3><ul><li>1Q22 revenue and NPI rose by +4.0% and +15.1% YoY, respectively, to S$44.8m (22.8% of BB est.) and S$34.3m (25.3% of BB est.), respectively, mainly due to lower rental assistance and lower operating expenses, which was partially offset by lower contributions from Wisma Atria (Revenue: -8.9%, NPI: -8% YoY). No DI nor DPU was disclosed</li></ul><div style="display: none;"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/238/455/original/blobid0.png?1635528963" class="editor-image img-responsive" data-smartkarma-image-id="238455"></figure></div>

SingaporeSREITs results in a glance (see detailed spreadsheet and calendar attached)Starhill Global REIT (SGREIT SP) 1Q22 Business Updates; Little help from VTL leading up to festive season1Q22 revenue and NPI rose by +4.0% and +15.1% YoY, respectively, to S$44.8m (22.8% of BB est.) and S$34.3m (25.3% of BB est.), respectively, mainly due to lower rental assistance and lower operating expenses, which was partially offset by lower contributions from Wisma Atria (Revenue: -8.9%, NPI: -8% YoY). No DI nor DPU was disclosed

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    <div class='content-caption'>SREIT</div>
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<p>Singapore continues to pursue a "Living with Covid-19" strategy, with anticipation to transit to a "new normal" in three to six months.</p>

<p>In the move to reopen borders and re-establish the country's status as a global hub, Singapore has extended its Vaccinated Travel Lane (VTL) scheme to eight more countries.</p>

<p>With more of such arrangements in discussion, the country's travel and hospitality sector is poised to benefit in the long run.<br><br>
There are five trusts in the S-REITs and Property Trusts sector with exposure to the hospitality segment in Singapore – Ascott Residence Trust, CDL Hospitality Trusts, Far East Hospitality Trust, Frasers Hospitality Trust and OUE Commercial REIT.<strong> </strong><br><br>
These five trusts have averaged 6.0 per cent in total returns in the year to date.</p>

<p>Following the announcement to expand the VTL scheme on Oct 9, these five trusts advanced an average of 5.4 per cent in the four trading sessions from Oct 11 to 14.<br><br>
Ascott Residence Trust (ART), one of the largest hospitality trusts in Asia-Pacific, has a portfolio of 89 properties, including serviced residences, hotels, rental housing and student accommodation.</p>

<p>ART observed that the initial phase of recovery remained largely driven by the domestic and essential corporate travel segments, and expects the return of international demand to be more gradual.</p>

<p>OUE Commercial Reit (OUE C-Reit) owns seven properties across the commercial and hospitality segments in Singapore and Shanghai, including Mandarin Orchard Singapore and Crowne Plaza Changi Airport.</p>

<p>In its first half 2021 results announcement, it noted that its hospitality segment revenue remained flat year on year due to the minimum rent under the master lease arrangements of the hotel properties.</p>

<p>CDL Hospitality Trusts (CDLHT) owns 15 hotels globally, including six in Singapore, and two resorts comprising a total of 4,631 rooms as well as a retail mall.</p>

<p>CDLHT noted that its portfolio of six Singapore hotels continued to be impacted by continued border closures and absence of major meetings, incentives, conferences and exhibitions (MICE) events.</p>

<p>Several of these trusts have conducted rebranding and asset enhancement exercises in preparation for the eventual upturn of the sector.</p>

<p>This includes ART, which started the rejuvenation of Somerset Liang Court and lyf one-north in Singapore, and OUE C-Reit's renovation of Mandarin Orchard Singapore.</p>

<p>Far East Hospitality Trust, the only pure-play Singapore hospitality trust, has also committed to expedite its asset enhancements.</p>

<p>To create more resilient portfolios and stable income streams, ART and CDLHT have also announced the expansion of their investment mandates to include more asset types.</p>

<p>CDLHT expanded its principal investment strategy to include rental housing, co-living, student accommodation and senior housing in July 2021.</p>

<p>ART has announced three acquisitions in the United States' student accommodation segment since the start of the year. <br><br><strong><em>REIT Watch is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/china-focused-s-reits-resilient-amid-onshore-property-focus"> </a><a href="https://www.businesstimes.com.sg/companies-markets/hospitality-s-reits-taking-off-with-more-travel-lanes">read </a>the original version.</em></strong></p>
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    SREIT


Singapore continues to pursue a "Living with Covid-19" strategy, with anticipation to transit to a "new normal" in three to six months.

In the move to reopen borders and re-establish the country's status as a global hub, Singapore has extended its Vaccinated Travel Lane (VTL) scheme to eight more countries.

With more of such arrangements in discussion, the country's travel and hospitality sector is poised to benefit in the long run.  
There are five trusts in the S-REITs and Property Trusts sector with exposure to the hospitality segment in Singapore – Ascott Residence Trust, CDL Hospitality Trusts, Far East Hospitality Trust, Frasers Hospitality Trust and OUE Commercial REIT.   
These five trusts have averaged 6.0 per cent in total returns in the year to date.

Following the announcement to expand the VTL scheme on Oct 9, these five trusts advanced an average of 5.4 per cent in the four trading sessions from Oct 11 to 14.  
Ascott Residence Trust (ART), one of the largest hospitality trusts in Asia-Pacific, has a portfolio of 89 properties, including serviced residences, hotels, rental housing and student accommodation.

ART observed that the initial phase of recovery remained largely driven by the domestic and essential corporate travel segments, and expects the return of international demand to be more gradual.

OUE Commercial Reit (OUE C-Reit) owns seven properties across the commercial and hospitality segments in Singapore and Shanghai, including Mandarin Orchard Singapore and Crowne Plaza Changi Airport.

In its first half 2021 results announcement, it noted that its hospitality segment revenue remained flat year on year due to the minimum rent under the master lease arrangements of the hotel properties.

CDL Hospitality Trusts (CDLHT) owns 15 hotels globally, including six in Singapore, and two resorts comprising a total of 4,631 rooms as well as a retail mall.

CDLHT noted that its portfolio of six Singapore hotels continued to be impacted by continued border closures and absence of major meetings, incentives, conferences and exhibitions (MICE) events.

Several of these trusts have conducted rebranding and asset enhancement exercises in preparation for the eventual upturn of the sector.

This includes ART, which started the rejuvenation of Somerset Liang Court and lyf one-north in Singapore, and OUE C-Reit's renovation of Mandarin Orchard Singapore.

Far East Hospitality Trust, the only pure-play Singapore hospitality trust, has also committed to expedite its asset enhancements.

To create more resilient portfolios and stable income streams, ART and CDLHT have also announced the expansion of their investment mandates to include more asset types.

CDLHT expanded its principal investment strategy to include rental housing, co-living, student accommodation and senior housing in July 2021.

ART has announced three acquisitions in the United States' student accommodation segment since the start of the year.   REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Hospitality S-Reits taking off with more travel lanes

Yoma Strategic Holdings / Equity Bottom-Up

Key Singapore Market Moves and Flows in 3Q21

Singapore

Frasers Hospitality Trust operates as a real estate investment trust. The Trust owns, operates and invests in hotels and serviced residences.

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Frasers Hospitality Trust (FHT SP)

ASEAN Builder's Scoop (28Jan22) - CICT Office Cap Rates Compressed

MAGIC high occupancy a priority; ART RevPAU rebounded strongly; CDREIT underlying operations recovering; FHT QoQ ongoing recovery; MREIT to acquire...

SCCM Asia Research

(Non-SGX Report) Initiating Coverage - Frasers Hospitality Trust

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

ASEAN Builder's Scoop (29Oct21)

SGREIT little help from VTL; CDREIT QoQ improvements across the board; FEHT stabilizing QoQ hotel metrics; FHT signals worst is over; MAGIC weak...

SCCM Asia Research

REIT Watch - Hospitality S-Reits taking off with more travel lanes

Singapore continues to pursue a "Living with Covid-19" strategy, with anticipation to transit to a "new normal" in three to six...

Singapore Exchange Ltd (SGX)

Key Singapore Market Moves and Flows in 3Q21

In 3Q21, the STI saw its narrowest quarterly trading range since 3Q17, generating a 0.2% decline in total return, while the FTSE APAC Index...

Singapore Exchange Ltd (SGX)

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