汇丰银行新加坡酒店业远东酒店信托评级提升为买入20170831FarEastHospitalityT

Disclosures&DisclaimerThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.MCI(P)126/02/2017MCI(P)069/06/2017Issuerofreport:TheHongkongandShanghaiBankingCorporationLimited,SingaporeBranchViewHSBCGlobalResearchat:–ResearchIsyouraccessagreed?CONTACTustodayWeintroduceFY19estimatesincorporatingthecontributionofSentosahotel(fromFY19)intoournumbersOurcyclicalrecoverythesisforSGhospitalityremainsintactUpgradetoBuy–TPrevisedtoSGD0.75(fromSGD0.70)WeintroduceFY19estimates;incorporatecontributionofSentosahotel:WeincorporatetheimpactofFEHT’sSentosahoteldevelopment(completioninFY19)asweintroduceFY19e.Asarecall,FEHTanditssponsorFarEastOrganisation(FEO)formeda30:70JVforthedevelopmentoftheOutposthotelandVillagehotelcompromising839rooms.FEHT’sshareoftheprojectcostofSGD443.8misSGD133.1m(SGD138.5mincludingREITrelatedexpensesofSGD5.4m),ofwhichSGD75mwouldbeFEHT’sshareofaJVloanandtherest(SGD63.5m)debt-fundedbyFEHT.WeexpectanincrementalannualizedDPUimpactofc0.22SGDcentsfromFY19.Separately,wehavealsoadjustedourADR,occupancyandmarginassumptionsateachofFEHT’spropertiestoreflectprevailingmarketconditionsbasedonourchannelchecks–thenetimpactoftheseisanincreaseinourFY17eandFY18erevenuesbyc2%eachandourFY17eandFY18eDPUbyc3%each.OurcyclicalrecoverythesisforSGhospitalityremainsintact:Asarticulatedinournotedated17May2017,SingaporeREITs:Continuedresilience,weremainconstructiveonSingaporehotelsandexpectamulti-yearcyclicalrecoveryfrom2018.Ourcyclicalrecoveryexpectationsareunderpinnedbyalackofsupplyanddemandremainingstablewithanypick-upincorporatedemandseenasupside.SpecificallyforFEHT,ourestimatesincorporatea2.5%p.a.growthinRevPAR(RevPAUforservicedapartments)overFY18andFY19–wenotehospitalityrevenuesareskewedtowardshotelsforFEHT(excludingthecontributionsfromancillarycommercial,80%+ofhospitalityrevenueswerefromhotelsfor2Q17).SponsorpipelinecouldbeanadditionaldriverforFEHT:FEHT’ssponsorhasasizeablepipelineofassets,whichcanincreasetheroom/unitcountby73%toc4,900rooms/units.WithdebtheadroomofcSGD300m(c40%gearing),thiscanbeanadditionaldriver.Purelyasanexample,the314-roomOasiaDowntowncouldbeentirelydebt-fundedgiventhisheadroom(assumingthehotelisvaluedatSGD700-900kperkey)–thiscoulddeliverc2-4%DPUaccretionperourestimates.UpgradetoBuy–TPraisedby7%toSGD0.75(fromSGD0.70):WereviseupourRNAVtoSGD0.78(fromSGD0.77)andourDDMtoSGD0.84(fromSGD0.79)–theaverageofourRNAVandDDMvaluationsisSGD0.81(previous:SGD0.78).OurTPispeggedata10%discount(unchanged)tothisaverageandroundedupisSGD0.75,andimplies14.5%upside–weupgradetoBuy.31August2017UPGRADETOBUYTARGETPRICE(SGD)PREVIOUSTARGET(SGD)0.750.70SHAREPRICE(SGD)UPSIDE/DOWNSIDE0.655+14.5%(asof29Aug2017)MARKETDATAMarketcap(SGDm)1,202Freefloat42%Marketcap(USDm)887BBGFEHTSP3mADTV(USDm)1RICFAEH.SIFINANCIALSANDRATIOS(SGD)Yearto12/2016a12/2017e12/2018e12/2019eHSBCDPU0.0430.0390.0400.042HSBCDPU(prev)-0.0380.039-Change(%)-3.32.9-ConsensusDPU-0.0400.0420.043Dividendyield(%)6.66.06.16.4PricetoNAV0.70.70.70.752-WEEKPRICE(SGD)Source:ThomsonReutersIBES,HSBCestimatesPratikBurmanRay*,CFASeniorPropertyAnalyst,ASEANTheHongkongandShanghaiBankingCorporationLimited,[e-mail][phone]UtkarshRastogi*AssociateBangalore*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisnotregistered/qualifiedpursuanttoFINRAregulationsFarEastHospitalityTrust(FEHTSP)EQUITIESREITSSingapore0.550.670.7808/1602/1708/17Targetprice:0.75High:0.68Low:0.57Current:0.66UpgradetoBuy:CheckinginEQUITIES●REITS31August20172FinancialstatementsYeartoDecember12/201612/2017e12/2018e12/2019eProfit&losssummary(SGDm)Grossrevenue109107111114Propertyexpenses(11)(11)(12)(12)Netpropertyincome989699102Assetmanagementandtrustexpenses(13)(12)(12)(13)EBIT86838790Netinterestexpense(20)(22)(24)(24)Investmentincome/otherincome(36)000Incomebeforetaxes30616366Incometaxexpense(0)000Incomeaftertax30616366Netinvestmentincome(fordistribution)78717377Cashflowsummary(SGDm)Cashgeneratedfromoperations9611195101Cashflowsfrominvestingactivities(13)(16)(15)(16)Cashflowsfromfinancingactivities(93)(77)(81)(86)Netchangeincashandcashequivalents(10)18(1)(1)Beginningcashandcashequivalents25153332Cashandcashequivalentsatend15333231Balancesheetsummary(SGDm)Non-currentassetsInvestmentproperties2,4182,4182,4182,418Othernon-currentassets17486480Totalnon-currentassets2,4342,4662,4822,498CurrentassetsTradeandotherreceivables39222223Cashandcashequivalents15333231Totalcurrentassets54555454TotalAssets2,4892,5212,5362,552CurrentliabilitiesTradeandotherpayables2334Shorttermborrowings2922321000Othercurrentliabilities11111111Totalcurrentliabilities30424611414Non-currentliabilitiesInterestbearingloans&borrowings531606754870Othernon-currentliabilities8242424Totalnon-currentliabilities539630778894TotalLiabilities843876892908NetAssets1,6461,6451,6441,644RatiogrowthandperunitanalysisYeartoDecember12/201612/2017e12/2018e12/2019eY-o-y%changeRevenue-5%-2%4%3%Netpropertyincome-5%-3%4%3%Incom