3 Hospitality REITs Set To Benefit From Singapore's Formula One Night Race

F1 Singapore
F1 Singapore  

Have you noticed that the roads near City Hall, Suntec city, and the Padang are starting to be filled with standee seats?

The Formula One Grand Prix, or F1, is coming back with a bang at the end of September.

Unsurprisingly, a lot of hype has been built around this event as this is the first time F1 is being held since 2019.

F1 is expected to bring in a crowd of more than 300,000 spectators. It is set to see its highest attendance since the race first began in 2008.

Within the period where the F1 race will take place, around 25 MICE (Meetings, Incentives, Conventions and Exhibitions) events will also be taking place.

An expected crowd of 90,000 delegates will be attending these events.

Prior to F1, the Singapore Tourism Board reported that Singapore already registered visitor arrivals' growth for the seventh straight month in August.

With this influx of tourists from more inbound flights, the hospitality sector will naturally benefit from this tailwind.

Let's take a look at three hospitality REITs with Singapore assets that should benefit strongly from this trend.

CDL Hospitality Trusts (SGX: J85)

CDL Hospitality Trusts, or CDLHT, is one of Asia's leading hospitality trusts with a S$2.9 billion portfolio of 19 operational properties (including a total of 4,821 rooms and a retail mall), and one build-to-rent project in the pipeline with 352 apartment units.

In Singapore alone, CDLHT has a total of seven properties, of which six are hotels and one is a lifestyle mall (Claymore Connect) that has direct access to Orchard Hotel.

CDLHT's total rooms from its six Singapore hotels stood at 2,556, more than half of its total number of hotel rooms.

Based on net property income (NPI), Singapore's share takes up more than 50% of CDLHT's total NPI.

In case you were wondering, the hotels are Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King's Hotel, Studio M Hotel, and W Singapore at Sentosa Cove.

In 1H2022, CDLHT's results showed the effects of the reopening theme seen across many major economies.

1H2022 revenue grew 49% year on year to S$98.6 million, while NPI grew 37.8% year on year to S$51 million, driven by higher contributions from its Singapore Hotels, Maldives Resorts and UK Hotels.

Among its hotel properties, Singapore's revenue per average room (RevPAR) was the region that saw the highest year on year increase.

RevPAR rose 72.1% to S$123 in 1H2022.

As a result of the stronger numbers, distribution per stapled security (DPSS) rose 67.2% year on year to S$0.0204 in 1H2022.

At a unit price of S$1.27, CDLHT has a trailing dividend yield of 4%.

Far East Hospitality Trust (SGX: Q5T)

Far East Hospitality Trust, or FEHT, is a hospitality stapled group  comprising Far East H-REIT and Far East H-Business Trust.

The former is a Singapore-based real estate investment trust that invests in hospitality assets, while the latter owns nine hotels and three serviced residences.

FEHT's sponsor is part of the Far East Organisation group of companies, which is also the largest private property developer in Singapore.

FEHT's hotels segment accounted for about 70% of its total revenue for 1H2022, while the remaining came from services residences and commercial premises.


Source: FEHT 1H2022 results presentation, revenue breakdown

In 1H2022, FEHT reported a 1.4% year on year decline in revenue to S$41 million, largely due to the divestment of Central Square on 24 March 2022.

NPI for 1H2022 rose 3.5% to S$37.5 million.

As a result of the divestment gain from Central Square, lower finance costs, and higher net property income, DPSS grew 41% year on year to S$0.0154.

At a unit price of S$0.61, FEHT has a trailing dividend yield of 5%.

Frasers Hospitality Trust (SGX: ACV)

Frasers Hospitality Trust, or FHT, is a global hotel and serviced residence trust that manages a quality portfolio of 14 properties in prime locations across nine key cities.

Its properties are spread out in prime locations across nine key cities in Asia, Australia, and Europe. Geographically, Singapore contributes 26% of FHT's net property income.

(insert pie chart here)


Souce: FHT 1H2022 results presentation, NPI % breakdown

In Singapore, FHT has two properties near the heart of the city, Fraser Suites Singapore, and Intercontinental Singapore.

Together, they have a total of 661 rooms.

Recently, FHT surprised many market observers over its failed privatisation attempt.

The cash offer of S$0.70 per stapled security, issued by sponsor Frasers Property Limited (SGX: TQ5), was at a seven percent premium to its net asset value.

At a unit price of S$0.53, the cash offer represents a 32% premium.

The minority unitholders felt that the offer wasn't attractive with borders reopening, as there will be a resurgence in the hospitality sector.

FHT's 1H2022 revenue  rose 10.4% year on year to S$44.1 million, while NPI rose 18.4% year on year to S$31.7 million.

This was mostly attributable to an improved operating environment (i.e. the reopening theme).

DPSS increased close to fourfold year on year to S$0.007039, largely due to lowered property tax expenses, lower assessed annual values of Singapore properties and lower impairment of receivables.

In FHT's 3Q2022 business update, it's also evident that all its properties are experiencing higher RevPAR, with Europe leading the way and Asia following closely behind.

At a unit price of S$0.50, FHT has a trailing dividend yield of 3.02%.

Final Thoughts

The reopening theme is just the tip of the iceberg.

A full recovery is imminent in the months to follow and the hospitality sector should see increased visitor numbers, thus lifting the fortunes for all the players.

Spotting this trend and the companies that may benefit from it continue to be what we diligently do as investors.

Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report "Singapore REITs Retirement Plan". Click here to download it now.

Disclaimer: Kent Lee does not own shares in any of the companies above.

The post 3 Hospitality REITs Set To Benefit From Singapore's Formula One Night Race appeared first on The Smart Investor.


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