Singapore Hospitality REITs: Record high RevPAR

2023-08-24 03:28:40.310 GMT

Abstract:
Jul-23 RevPAR hit a record high of S$261.2 (+28.3% YoY/19.% MoM). The prior
high was S$241.7 in Nov-22 and S$222 in Feb-12 and Sep-08 pre-COVID. The strong
RevPAR performance is consistent with commentary from CDREIT and potential for
record 3Q23 during its recent results briefing ( link ). Underpinning the jump
in RevPAR was total visitor arrivals into Singapore increasing 26% MoM/95% YoY
to 1.4m visitors with Chinese visitors doubling MoM in Jul-23. While CLAS and
CDREIT missed Street expectations in their 1H23 results, they have already
corrected by 11%/7% versus 6%/3% drop in SREIT/STI index, we believe a large
proportion of the negatives have been priced in considering the expected strong
top line. For CLAS, we see potential volatility over the coming 1-2 months
which would be a buying opportunity as CLAS’ stock price has largely been
trading below its preferential offering price of S$1.025. We maintain our OW
ratings on CLAS, CDREIT and FEHT (where it beat 1H23 result expectations - link
). Broad based RevPAR improvement . Strong Jul-23 RevPAR was driven by higher
room rates (S$290.4 versus S$271.5/S$257.3 in Jun-23/Jul-22) and increase in
occupancy (89.9% versus 80.5%/79.1% in Jun-23/Jul-22) taking 7M23 RevPAR to
S$220.1 which is tracking above our S$213 estimate for 2023. Improvement in
RevPAR was driven by increases in Economy (+44.1% YoY/+27.6% MoM to S$145.6),
Upscale (+39.9% YoY/+25.1% MoM to S$311.7), Luxury (+28.4% YoY/+11.9% MoM to
S$538.7) and Mid-Tier (+21.2% YoY/+19.9% MoM to S$204.1). The performance was
impressive considering the 3.4% YoY/0.8% MoM increase in room stock to 64,043
rooms. Doubling of Chinese tourists in Jul-23 to 231,326 visitors (+77% YoY)
from 113,290 in Jun-23, led to total visitor arrivals into Singapore increasing
26% MoM/95% YoY to 1.4m visitors (89% of pre-COVID) in Jul-23. Beyond visitors
from China, key source markets of Indonesia and Australia saw 6% MoM/93% YoY
and 8.4% MoM/44% YoY increase to 229,886 and 98,406 visitors, respectively,
partially offset by 19% MoM (+24% YoY) fall in India visitors to 93,054. The
increase in overall arrivals also contributed to Jul-23 total visitor days
rising 20% MoM/46% YoY to 5.4m days. Near-term volatility in CLAS. CLAS’ S$100m
non-renounceable preferential offering to help fund acquisitions in London,
Dublin and Jakarta and AEIs in the UK and Australia ( link ) is set to close by
9.30pm today (24-Aug). CLAS’ Sponsor, CLI has indicated it will take up its
pro-rata entitlement (~32% stake). However, as CLAS has largely traded below
the S$1.025 preferential price price since the offering was opened on 16-Aug,
there is risk of reduced subscription by CLAS’ other unitholders with
underwriting banks taking units and disposing them subsequently. However, the
potential unnatural selling is a buying opportunity in our view, considering
expected tourism recovery, CLAS trading at ~11% to book value and offering a
high 5% yield (per consensus estimates).
-0- Aug/24/2023 03:28 GMT

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