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Analysts: Buy MERS-Safe Frasers Hospitality Trust For 10% Upside
Aspire, Hot Picks | 19 June 2015
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By: Raymond Leung
Articles (142) Profile

Analysts' updates as at 19/06/2015

As MERS spreads closer to home in South Korea, some fear that the virus will spread to Singapore. MERS has yet to have an impact in Singapore (with the exception of SIA) as not many companies have exposure to South Korea.

Analysts believe that it is only a matter of time before MERS hits Singapore but a SARS-like scenario is unlikely. Authorities are now more prepared from the lessons that we had learned and thus a widespread epidemic in Singapore is highly unlikely.

Therefore, effect on the hospitality sector is likely limited but will definitely be affected should MERS hits Singapore. Analysts from the street will not put a “MERS discount” on the hospitality trusts but prefer trusts with diversified geographic exposures.

Ascendas Hospitality Trust

Source: Portfolio By Geographic, Ascendas Hospitality Trust

Ascendas Hospitality Trust (ASCHT) has 12 properties across Australia, China, Japan and Singapore with well-known brands such as Pullman, Novotel and Park Hotel under its belt.

However, its Australian presence might be a disadvantage because of the weak sentiments towards the Australian Dollar. Furthermore, the fact that it accounts for 46 percent of ASCHT’s portfolio does not make it any better.

Conversely, Japan might have benefited from the crisis in South Korea as tourists are avoiding the latter and redirecting their interest to Japan.

Analysts from DBS Group Research gave ASCHT a “Buy” call with a potential upside of 7.04 percent. This is supported by the diversified portfolio and a high yield of 7.2 percent.

OUE Hospitality Trust

Source: Portfolio By Geographic, OUE Hospitality Trust

OUE Hospitality Trust (OUEHT) is the only trust with 100 percent exposure in Singapore. The key attractions of this trust include the high yield of 7.2 percent, high quality of assets and a mix of hospitality and retail assets. However, this also means that OUEHT will be highly affected if MERS hits Singapore.

Crowne Plaza Changi Airport is the only property in the portfolio that will be less affected by MERS as its main clientele are business travellers. They are less likely to make changes to their travelling plans due to virus spreading in a country.

In the event where MERS breaks out in Singapore, probability for transit travellers to stay at the airport hotel is higher as they would have reduced exposure to public spaces.

In view of the high yield, analysts from DBS Group Research gave OUEHT a “Buy” call with a potential upside of 5.4 percent. This counter is not advisable for investors that is worried about the risk of a MERS outbreak in Singapore.

Frasers Hospitality Trust

Source: Portfolio By Geographic, Frasers Hospitality Trust

Frasers Hospitality Trust (FHT) has 12 properties across five countries, comprising both hotels and serviced apartments. Properties in Singapore weighs nearly half of its portfolio with 49.5 percent.

The unique mix of hotels and serviced apartments and its diversified geographic presence are the main advantages that FHT has. Furthermore, tenants in Singapore’s serviced apartments has a lease agreement.

Analysts from DBS Group Research gave FHT a “Buy” call with a target price of $0.96. Trading at the price of $0.86, the trust has a potential upside of 11.6 percent and is trading at a yield of 6.9 percent.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Ascendas Hospitality Trust  1.080 +0.010 +0.93%   
Business: A stapled group comprising Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust.

Insight: May-19, FY19 revenue fell 6.3% to $190.5m while NP... Read More
OUE Hospitality Trust  -- -- --   
Business: A stapled group comprising OUE H-REIT & OUE H-Biz Trust with a portfolio primarily focused in the hospitality &/or hospitality-related purposes.

Insight: May-19, 1Q19 revenue slid 3% due to lower revenue ... Read More
Frasers Hospitality Trust  0.715 -- --   
Business: A stapled group comprising Frasers Hospitality REIT and Frasers Hospitality Business Trust.

Insight: Apr-19, 1H19 gross revenue sank 4.7% to $75.3m and... Read More

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