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REIT 4Q18 Report Card: 3 REITs Which You Can Expect More In FY19

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In the last part of this 6-part series, we highlight three REITs that investors can expect more to come in FY19, despite an unsurprising performance in 4Q18.

Investors Takeaway: 3 REITs Which You Can Expect More In FY19

  1. CDL Hospitality Trust

Despite FY18 net property income (NPI) declining by 3.8 percent year-on-year, CDL Hospitality Trust managed to surprise on its DPU. The weaker FY18 NPI was due to the closure of Dhevanafushi Maldives Luxury Resort in Maldives and the divestment of Mercure Brisbane and Ibis Brisbane. The New Zealand segment also suffered due to the absence of sporting events. DPU, however, increased by 0.4 percent, which was above expectations due to higher-than-expected capital distribution from the sale of Mercure and Ibis Brisbane.

Going forward, CIMB forecasts RevPAR in Singapore to see improvements, driven by the lower supply and encouraging tourist arrivals in Singapore. CDL Hospitality Trust should see a stronger 2H19 performances as Orchard Hotel completes its refurbishment while the repositioned Raffles Maldives Meradhoo Resort starts operating in 2Q19.

BUY, TP $1.64, REIT Report Card Rating: B-

  1. Ascendas REIT

Ascendas REIT (A-REIT) managed to deliver thanks to contribution from new acquisitions in Australia and two UK portfolios, which were slightly offset by the equity fund raising for its second UK portfolio. New take ups at 20 Tuas Ave 1, [email protected], and 9 Changi South St 3 also helped A-REIT improve its portfolio occupancy.

More importantly, A-REIT managed to secure a $181.2M development project for Grab’s headquarters in Singapore. The 42,310 sqm property, located in one-north, will be fully leased by Grab to house all its Singapore-based employees. The lease will run for 11 years with a renewal option of five years and have built-in rental annual rental escalations. CIMB notes that the property will have an NPI yield of 6.4 percent. Post-completion of Grab’s new headquarters, A-REIT business park segment will constitute 34 percent of its portfolio.

BUY, TP $2.83, REIT Report Card Rating: B

  1. Far East Hospitality Trust

Thanks to the addition of Oasia Hotel Downtown and better performance from existing hotels, Far East Hospitality Trust managed to grow its revenue and net income by 9.5 percent and 10.3 percent in FY18.

In particular, FY18 RevPAR improved by 6.2 percent year-on-year on the back of an increase in average occupancy and average daily rate. The strongest RevPAR growth came in 4Q18, driven by the completion of Orchard Rendezvous Hotel. Far East Hospitality Trust’s serviced residences also managed to turnaround with a strong RevPAR growth of 7.5 percent. This was driven by higher demand from leisure as Far East Hospitality Trust managed to penetrate online bookings.

As the management remains upbeat on the outlook of its hotel business going forward thanks to stronger tourist arrivals and lower supply of hotels in 2019, Far East Hospitality Trust plans to re-introduce a dividend reinvestment program.

BUY, TP $0.68, REIT Report Card Rating: B-

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REIT 4Q18 Report Card: 2 REITs Value Investors Would Love

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