Four largest hospitality REITs average NPI fell 2% in Q2

Declining income from Frasers Hospitality Trust and OUE H-Trust weighed on headline figures.

The average net property income (NPI) of the four biggest Singapore Exchange (SGX)-listed hospitality REITs dropped 2% YoY to $38m, according to the SGX. Average revenue also slipped 3% YoY to $61.1m. Distribution per unit (DPU) averaged $0.0153, down by 3.8% YoY.

Also read: Hospitality REITs cash in on tourism high

The quarterly headline figure was dragged down by declines from two REITs. Frasers Hospitality Trust (FHT) recorded the sharpest NPI decline, down 11% YoY to $25.4m; whilst OUE Hospitality Trust (OUE H-Trust) NPI slipped 4.5% YoY to $25.3m.

In contrast, Ascott Residence Trust (Ascott REIT) recorded the largest growth at 7.1% YoY with $67.6m profit. Ascott REIT was also the only firm to record positive revenue and DPU growth which rose by 1.5% YoY to $132.5m and 7.6% YoY to $0.0198 respectively.

CDL Hospitality Trust’s (CDLHT) NPI inched up 0.5% YoY to $33.8m. CDLHT also reported the highest DPU at $0.0207 although it fell 3.3% YoY compared to the previous year.

On the other hand, FHT recorded the steepest decline and lowest DPU, which fell 10.2% YoY to $0.0102. Meanwhile, OUE H-Trust’s DPU declined 9.4% YoY to $0.0106 per unit.

Revenue for CDLHT, FHT, and DPU also diminished 0.5%, 8.4% and 4.4%, respectively.

The four REITs’ average aggregate leverage ratio stayed flat from Q2 2018 at 35.4%. Accordingly, OUE H-Trust and CDLHT had the highest aggregate leverage ratios of 38.5% and 35.2% respectively, with FHT following closely at 35%. On the other hand, Ascott REIT had the lowest gearing of 32.8%.

“In the YTD, SGX’s four largest hospitality trusts averaged a total return of 13.2%, bringing their one-year and three year total returns to 9.4% and 33.0%. They also averaged a price-to-book ratio of 0.9x and a dividend indicated yield of 6.3%. The best performers amongst the four were Ascott Residence Trust and CDL Hospitality Trusts, with YTD total returns of 23.9% and 13.8% respectively,” SGX said added.

In total, the four REITs has a combined market cap of $7b.

A report by UOB Kay Hian Research noted a bright outlook for hospitality REIT sector due to a series of government initiatives to develop new tourism attractions as well as limited hotel supply.

Also read: Hotel demand continue outstripping room stock in 2019

Only 3,415 hotel rooms will be completed in 2019-22 whilst visitor arrivals are expected to grow at a faster rate, which will result in higher revenue per available room (RevPAR) over the next three years. For 2019 alone, visitor arrivals are expected to rise by 1% to 4% YoY.

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