Compiled by Anita Gabriel
Ascott Residence Trust | Buy
Target price: $1.34
Jan 29 close: $1.26
DBS Group Research, Jan 29
Consensus has a 'hold' call with an average target price below Ascott Residence Trust's (ART) book value, given concerns over the decline in FY17 distribution per unit (DPU). However, in our view, this has already been well flagged in the past.
The more critical factor that would drive ART's share price is the trust's more aggressive execution over the past year of selling properties that have limited growth and recycling the proceeds into better-yielding assets. This ability to sell its properties above book value, and at the same time reduce its reliance on equity raising to drive growth, warrants ART to trade above its book value as implied in our target price.
Beyond crystallising its book value, we believe the resumption of DPU growth from FY18 onwards as ART benefits from the full-year contribution of its recent acquisitions should prompt a further re-rating. We have forecast two-year DPU CAGR (compound annual growth rate) of 2 per cent over 2017-2019.
With the Singapore hospitality market expected to stage a multi-year recovery from 2018, based on historical correlations, the positive sentiment on the sector should lift all boats including ART.
The key risk to our call is potential oversupply in ART's key markets and impact from forex volatility. These risks are mitigated by ART's diversified portfolio.
CDL Hospitality Trusts | Buy
Target price: $1.95
Jan 29 close: $1.83
RHB Research, Jan 29
CDLHT's Singapore hotel revenue per available room (RevPAR) turned positive in Q4FY17 after 12 consecutive quarters of decline, signalling the onset of recovery in the hospitality market.
Its outlook for 2018 is positive, with RevPAR expected to rebound by 3-7 per cent. The hospitality sector's outlook for 2018 looks promising - aided by lower hotel supply, a pick-up in corporate demand and an increase in demand from visitors.
In its overseas unit, the better performance anticipated from its New Zealand and Europe hotels would be partially offset by weakness in assets in the Maldives and Japan due to increased competition from new supply.
Asset enhancement works are now ongoing for its resorts in the Maldives, hotels in Japan and Orchard Hotel to enhance their competitiveness.
With a strengthened balance sheet, CDLHT is well-positioned for more acquisition led-growth. Despite recent overseas acquisitions, CDLHT remains one of the most liquid proxies that offer exposure to the Singaporean hospitality market recovery.
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