Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

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Of the 45 trusts listed on SGX, at least eight are engaged in the development, ownership, management and operation of serviced residences, rental housing properties, hotels and other hospitality assets. Among the eight, the four largest are Ascott Residence Trust, CDL Hospitality Trusts, Frasers Hospitality Trust and OUE Hospitality Trust, with a combined market cap of more than S$7 billion. 
	 </li>
	<li>
For the quarter ended 30 June 2019, the four trusts averaged a DPU of 1.53 Singapore cents, down an average 3.8% YoY. CDL Hospitality Trusts reported the highest DPU of 2.07 Singapore cents, while Ascott Residence Trust registered the highest YoY growth in DPU of 7.6% to 1.98 Singapore cents. 
	 </li>
	<li>Analysts expect brighter prospects ahead, with hospitality REITs seen benefiting from Singapore government initiatives to develop new tourism attractions, and a limited supply of hotel rooms in the city-state over the next three years. While geopolitical headwinds could dent near-term visitor arrivals, travel demand remains underpinned by robust economic growth in the Asia-Pacific region and its expanding middle class.</li>
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SGX lists 35 REITs, seven stapled trusts and three property trusts with a combined market cap of over S$100 billion. Singapore REITs was the top net buy sector in the first half of 2019, drawing net institutional inflows of nearly S$400 million over the period.

Of these 45 REITs, at least eight are engaged in the acquisition, development, ownership, management and operation of serviced residences, rental housing properties, hotels and other hospitality assets. Their portfolios span key cities in Southeast and Northeast Asia, western Europe, US, as well as Australia and New Zealand.

Among these eight trusts, the four largest hospitality trusts by market capitalisation are: Ascott Residence Trust, CDL Hospitality Trusts, Frasers Hospitality Trust and OUE Hospitality Trust, with a combined market cap of more than S$7 billion. Over the last two weeks, these four hospitality REITs have reported results for the three months ended 30 June 2019.

Last month, Ascott Residence Trust unveiled its proposed merger with Ascendas Hospitality Trust to form Asia Pacific’s largest hospitality trust and the world’s 8th largest, with an asset value of more than S$7 billion.

Earnings Highlights 

For the three months ended 30 June 2019, the four trusts averaged a distribution per unit (DPU) of 1.53 Singapore cents, down an average 3.8% YoY. CDL Hospitality Trusts reported the highest DPU of 2.07 Singapore cents among the four trusts, down 3.3% YoY. Ascott Residence Trust registered the highest YoY growth in DPU of 7.6% to 1.98 Singapore cents, while Frasers Hospitality Trust registered the largest YoY decline of 10.2% in DPU to 1.01 Singapore cents.

These trusts averaged a 2.0% YoY fall in net property income to S$38.0 million, while gross revenue declined an average 3.0% YoY to S$61.1 million.

The four REITs averaged an aggregate leverage ratio of 35.4% as of the quarter ended 30 June 2019, unchanged from the average in the year-ago period. OUE Hospitality Trust and CDL Hospitality Trusts had the highest aggregate leverage ratios of 38.5% and 35.2% respectively, while Ascott Residence Trust had the lowest gearing of 32.8%. Interest cover for the four trusts averaged 4.9x times in the June quarter, versus 4.8x from the year-ago period. CDL Hospitality Trusts had the highest ICR of 5.8x in the quarter, followed by Ascott Residence Trust at 5.2x.

June Quarter 2019 Financial Performances

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Distribution Per Unit (SG cts)
			</td>
			<td>
			YoY Change (%)
			</td>
			<td>
			Net Property Income (S$M)
			</td>
			<td>
			YoY % change
			</td>
			<td>
			Gross Revenue (S$M)
			</td>
			<td>
			YoY Change (%)
			</td>
		</tr>
<tr>
<td>
			ASCOTT RESIDENCE TRUST
			</td>
			<td>
			1.98~
			</td>
			<td>
			7.6
			</td>
			<td>
			67.6^
			</td>
			<td>
			7.1
			</td>
			<td>
			132.5
			</td>
			<td>
			1.5
			</td>
		</tr>
<tr>
<td>
			CDL HOSPITALITY TRUSTS
			</td>
			<td>
			2.07
			</td>
			<td>
			-3.3
			</td>
			<td>
			33.8
			</td>
			<td>
			0.5
			</td>
			<td>
			47.5
			</td>
			<td>
			-0.5
			</td>
		</tr>
<tr>
<td>
			FRASERS HOSPITALITY TRUST
			</td>
			<td>
			1.01
			</td>
			<td>
			-10.2
			</td>
			<td>
			25.4
			</td>
			<td>
			-11.0
			</td>
			<td>
			35.0
			</td>
			<td>
			-8.4
			</td>
		</tr>
<tr>
<td>
			OUE HOSPITALITY TRUST
			</td>
			<td>
			1.06
			</td>
			<td>
			-9.4
			</td>
			<td>
			25.3
			</td>
			<td>
			-4.5
			</td>
			<td>
			29.4
			</td>
			<td>
			-4.4
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			1.53
			</td>
			<td>
			-3.8
			</td>
			<td>
			38.0
			</td>
			<td>
			-2.0
			</td>
			<td>
			61.1
			</td>
			<td>
			-3.0
			</td>
		</tr>
</tbody></table>
~includes FX gain of S$3.1 mln from repayment of foreign currency bank loans with divestment proceeds from Ascott Raffles Place Singapore ^Gross Profit; with adoption of accounting standard FRS 116 Leases with effect from 1 Jan 2019

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 June 2019
			</td>
			<td>
			Aggregate Leverage Ratio (%) as at 30 June 2018
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 June 2019
			</td>
			<td>
			Interest Coverage Ratio (x) as at 30 June 2018
			</td>
		</tr>
<tr>
<td>
			ASCOTT RESIDENCE TRUST
			</td>
			<td>
			32.8
			</td>
			<td>
			35.7
			</td>
			<td>
			5.2
			</td>
			<td>
			4.5
			</td>
		</tr>
<tr>
<td>
			CDL HOSPITALITY TRUSTS
			</td>
			<td>
			35.2
			</td>
			<td>
			33.2
			</td>
			<td>
			5.8
			</td>
			<td>
			7.5
			</td>
		</tr>
<tr>
<td>
			FRASERS HOSPITALITY TRUST
			</td>
			<td>
			35.0
			</td>
			<td>
			34.0
			</td>
			<td>
			4.6
			</td>
			<td>
			5.1
			</td>
		</tr>
<tr>
<td>
			OUE HOSPITALITY TRUST
			</td>
			<td>
			38.5
			</td>
			<td>
			38.7
			</td>
			<td>
			3.8
			</td>
			<td>
			2.0
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			35.4
			</td>
			<td>
			35.4
			</td>
			<td>
			4.9
			</td>
			<td>
			4.8
			</td>
		</tr>
</tbody></table>
Source: Company data

YTD Performances

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 among the four were Ascott Residence Trust and CDL Hospitality Trusts, with YTD total returns of 23.9% and 13.8% respectively.

The table below details SGX’s four largest hospitality REITs, sorted by market capitalisation.

<table class="table table-striped"><tbody>
<tr>
<td>
			Name
			</td>
			<td>
			SGX Code
			</td>
			<td>
			Market Cap (S$M)
			</td>
			<td>
			Total Return YTD (%)
			</td>
			<td>
			Total Return 1Y (%)
			</td>
			<td>
			Total Return 3Y (%)
			</td>
			<td>
			P/B (x)
			</td>
			<td>
			Div Ind Yld (%)
			</td>
		</tr>
<tr>
<td>
			ASCOTT RESIDENCE TRUST
			</td>
			<td>
			A68U
			</td>
			<td>
			2,740
			</td>
			<td>
			23.9
			</td>
			<td>
			22.8
			</td>
			<td>
			44.6
			</td>
			<td>
			0.8
			</td>
			<td>
			5.9
			</td>
		</tr>
<tr>
<td>
			CDL HOSPITALITY TRUSTS
			</td>
			<td>
			J85
			</td>
			<td>
			1,902
			</td>
			<td>
			13.8
			</td>
			<td>
			9.3
			</td>
			<td>
			41.4
			</td>
			<td>
			1.0
			</td>
			<td>
			5.8
			</td>
		</tr>
<tr>
<td>
			FRASERS HOSPITALITY TRUST
			</td>
			<td>
			ACV
			</td>
			<td>
			1,326
			</td>
			<td>
			3.1
			</td>
			<td>
			6.6
			</td>
			<td>
			18.7
			</td>
			<td>
			0.8
			</td>
			<td>
			6.5
			</td>
		</tr>
<tr>
<td>
			OUE HOSPITALITY TRUST
			</td>
			<td>
			SK7
			</td>
			<td>
			1,330
			</td>
			<td>
			12.0
			</td>
			<td>
			-1.3
			</td>
			<td>
			27.4
			</td>
			<td>
			1.1
			</td>
			<td>
			6.8
			</td>
		</tr>
<tr>
<td>
			Average
			</td>
			<td>
			 
			</td>
			<td>
			 
			</td>
			<td>
			13.2
			</td>
			<td>
			9.4
			</td>
			<td>
			33.0
			</td>
			<td>
			0.9
			</td>
			<td>
			6.3
			</td>
		</tr>
</tbody></table>
Source: Bloomberg &amp; StockFacts (data as of 6 Aug 2019)

Outlook Seen Brightening

According to a report by UOB-Kay Hian Research published on 18 July 2019, hospitality REITs will benefit from a series of consistent government initiatives to develop new tourism attractions – including those at Sentosa, Pulau Brani and the Greater Southern Waterfront – and limited supply of hotel rooms.

A total of 3,415 hotel rooms will be completed in 2019-2022, while visitor arrivals growth is expected to be significantly higher, resulting in an uplift to revenue per available room (RevPAR) – a closely watched industry metric – over the next three years, the report noted.

The Urban Redevelopment Authority’s (URA) announcement in May that the use of private residential properties for short-term accommodation – totalling less than three consecutive months – is illegal will also boost the hospitality industry, eliminating competition from alternative forms of lodging, such as Airbnb, the report added.

In a 24 July 2019 report, CGS-CIMB Research forecast industry RevPAR to remain flat or edge up 1% this year, and grow 2%-3% YoY next year. “The sector’s hotel room supply remains tight, and we believe the weakness in tourist arrivals and RevPAR performance is temporary. We believe RevPAR performance will rebound in 2020, as biennial events return while supply remains low,” the report added.

For YTD May 2019, Singapore’s visitor arrivals rose 1.5% YoY to 7.8 million and seven of the top 10 source markets registered growth. Coupled with an increase in the average length of stay in the city-state, total visitor days grew 2.5% YoY, according to data from Singapore Tourism Board (STB). STB has forecast visitor arrivals to rise by 1%-4% YoY for the whole of 2019.

International tourist arrivals grew 4% in the first three months of 2019, with Asia Pacific being one of the bright spots that registered a 6% increase, Ascott Residence Trust said in its 30 July results statement, citing data from the World Tourism Organization. Asia Pacific continues to see strong demand for lodging, where business and leisure travel demand remains underpinned by economic growth and an expanding middle class, it added.

Despite favourable demand-supply dynamics in the domestic hospitality sector, headwinds in the global economy could dent leisure and corporate travel demand, Frasers Hospitality Trust noted in its 30 July results statement. It pointed out that the slowdown in China’s economic growth, a weaker yuan and waning consumer confidence may hurt outbound travel demand in the world’s second-largest economy.
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Of the 45 trusts listed on SGX, at least eight are engaged in the development, ownership, management and operation of serviced residences, rental housing properties, hotels and other hospitality assets. Among the eight, the four largest are Ascott Residence Trust, CDL Hospitality Trusts, Frasers Hospitality Trust and OUE Hospitality Trust, with a combined market cap of more than S$7 billion. 
	 
	
For the quarter ended 30 June 2019, the four trusts averaged a DPU of 1.53 Singapore cents, down an average 3.8% YoY. CDL Hospitality Trusts reported the highest DPU of 2.07 Singapore cents, while Ascott Residence Trust registered the highest YoY growth in DPU of 7.6% to 1.98 Singapore cents.  
	 
	Analysts expect brighter prospects ahead, with hospitality REITs seen benefiting from Singapore government initiatives to develop new tourism attractions, and a limited supply of hotel rooms in the city-state over the next three years. While geopolitical headwinds could dent near-term visitor arrivals, travel demand remains underpinned by robust economic growth in the Asia-Pacific region and its expanding middle class.

SGX lists 35 REITs, seven stapled trusts and three property trusts with a combined market cap of over S$100 billion. Singapore REITs was the top net buy sector in the first half of 2019, drawing net institutional inflows of nearly S$400 million over the period.

Of these 45 REITs, at least eight are engaged in the acquisition, development, ownership, management and operation of serviced residences, rental housing properties, hotels and other hospitality assets. Their portfolios span key cities in Southeast and Northeast Asia, western Europe, US, as well as Australia and New Zealand.

Among these eight trusts, the four largest hospitality trusts by market capitalisation are: Ascott Residence Trust, CDL Hospitality Trusts, Frasers Hospitality Trust and OUE Hospitality Trust, with a combined market cap of more than S$7 billion. Over the last two weeks, these four hospitality REITs have reported results for the three months ended 30 June 2019.

Last month, Ascott Residence Trust unveiled its proposed merger with Ascendas Hospitality Trust to form Asia Pacific’s largest hospitality trust and the world’s 8th largest, with an asset value of more than S$7 billion.

Earnings Highlights 

For the three months ended 30 June 2019, the four trusts averaged a distribution per unit (DPU) of 1.53 Singapore cents, down an average 3.8% YoY. CDL Hospitality Trusts reported the highest DPU of 2.07 Singapore cents among the four trusts, down 3.3% YoY. Ascott Residence Trust registered the highest YoY growth in DPU of 7.6% to 1.98 Singapore cents, while Frasers Hospitality Trust registered the largest YoY decline of 10.2% in DPU to 1.01 Singapore cents.

These trusts averaged a 2.0% YoY fall in net property income to S$38.0 million, while gross revenue declined an average 3.0% YoY to S$61.1 million.

The four REITs averaged an aggregate leverage ratio of 35.4% as of the quarter ended 30 June 2019, unchanged from the average in the year-ago period. OUE Hospitality Trust and CDL Hospitality Trusts had the highest aggregate leverage ratios of 38.5% and 35.2% respectively, while Ascott Residence Trust had the lowest gearing of 32.8%. Interest cover for the four trusts averaged 4.9x times in the June quarter, versus 4.8x from the year-ago period. CDL Hospitality Trusts had the highest ICR of 5.8x in the quarter, followed by Ascott Residence Trust at 5.2x.

June Quarter 2019 Financial Performances




			Name
			
			
			Distribution Per Unit (SG cts)
			
			
			YoY Change (%)
			
			
			Net Property Income (S$M)
			
			
			YoY % change
			
			
			Gross Revenue (S$M)
			
			
			YoY Change (%)
			
		


			ASCOTT RESIDENCE TRUST
			
			
			1.98~
			
			
			7.6
			
			
			67.6^
			
			
			7.1
			
			
			132.5
			
			
			1.5
			
		


			CDL HOSPITALITY TRUSTS
			
			
			2.07
			
			
			-3.3
			
			
			33.8
			
			
			0.5
			
			
			47.5
			
			
			-0.5
			
		


			FRASERS HOSPITALITY TRUST
			
			
			1.01
			
			
			-10.2
			
			
			25.4
			
			
			-11.0
			
			
			35.0
			
			
			-8.4
			
		


			OUE HOSPITALITY TRUST
			
			
			1.06
			
			
			-9.4
			
			
			25.3
			
			
			-4.5
			
			
			29.4
			
			
			-4.4
			
		


			Average
			
			
			1.53
			
			
			-3.8
			
			
			38.0
			
			
			-2.0
			
			
			61.1
			
			
			-3.0
			
		

~includes FX gain of S$3.1 mln from repayment of foreign currency bank loans with divestment proceeds from Ascott Raffles Place Singapore ^Gross Profit; with adoption of accounting standard FRS 116 Leases with effect from 1 Jan 2019




			Name
			
			
			Aggregate Leverage Ratio (%) as at 30 June 2019
			
			
			Aggregate Leverage Ratio (%) as at 30 June 2018
			
			
			Interest Coverage Ratio (x) as at 30 June 2019
			
			
			Interest Coverage Ratio (x) as at 30 June 2018
			
		


			ASCOTT RESIDENCE TRUST
			
			
			32.8
			
			
			35.7
			
			
			5.2
			
			
			4.5
			
		


			CDL HOSPITALITY TRUSTS
			
			
			35.2
			
			
			33.2
			
			
			5.8
			
			
			7.5
			
		


			FRASERS HOSPITALITY TRUST
			
			
			35.0
			
			
			34.0
			
			
			4.6
			
			
			5.1
			
		


			OUE HOSPITALITY TRUST
			
			
			38.5
			
			
			38.7
			
			
			3.8
			
			
			2.0
			
		


			Average
			
			
			35.4
			
			
			35.4
			
			
			4.9
			
			
			4.8
			
		

Source: Company data

YTD Performances

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 among the four were Ascott Residence Trust and CDL Hospitality Trusts, with YTD total returns of 23.9% and 13.8% respectively.

The table below details SGX’s four largest hospitality REITs, sorted by market capitalisation.




			Name
			
			
			SGX Code
			
			
			Market Cap (S$M)
			
			
			Total Return YTD (%)
			
			
			Total Return 1Y (%)
			
			
			Total Return 3Y (%)
			
			
			P/B (x)
			
			
			Div Ind Yld (%)
			
		


			ASCOTT RESIDENCE TRUST
			
			
			A68U
			
			
			2,740
			
			
			23.9
			
			
			22.8
			
			
			44.6
			
			
			0.8
			
			
			5.9
			
		


			CDL HOSPITALITY TRUSTS
			
			
			J85
			
			
			1,902
			
			
			13.8
			
			
			9.3
			
			
			41.4
			
			
			1.0
			
			
			5.8
			
		


			FRASERS HOSPITALITY TRUST
			
			
			ACV
			
			
			1,326
			
			
			3.1
			
			
			6.6
			
			
			18.7
			
			
			0.8
			
			
			6.5
			
		


			OUE HOSPITALITY TRUST
			
			
			SK7
			
			
			1,330
			
			
			12.0
			
			
			-1.3
			
			
			27.4
			
			
			1.1
			
			
			6.8
			
		


			Average
			
			
			 
			
			
			 
			
			
			13.2
			
			
			9.4
			
			
			33.0
			
			
			0.9
			
			
			6.3
			
		

Source: Bloomberg &amp; StockFacts (data as of 6 Aug 2019)

Outlook Seen Brightening

According to a report by UOB-Kay Hian Research published on 18 July 2019, hospitality REITs will benefit from a series of consistent government initiatives to develop new tourism attractions – including those at Sentosa, Pulau Brani and the Greater Southern Waterfront – and limited supply of hotel rooms.

A total of 3,415 hotel rooms will be completed in 2019-2022, while visitor arrivals growth is expected to be significantly higher, resulting in an uplift to revenue per available room (RevPAR) – a closely watched industry metric – over the next three years, the report noted.

The Urban Redevelopment Authority’s (URA) announcement in May that the use of private residential properties for short-term accommodation – totalling less than three consecutive months – is illegal will also boost the hospitality industry, eliminating competition from alternative forms of lodging, such as Airbnb, the report added.

In a 24 July 2019 report, CGS-CIMB Research forecast industry RevPAR to remain flat or edge up 1% this year, and grow 2%-3% YoY next year. “The sector’s hotel room supply remains tight, and we believe the weakness in tourist arrivals and RevPAR performance is temporary. We believe RevPAR performance will rebound in 2020, as biennial events return while supply remains low,” the report added.

For YTD May 2019, Singapore’s visitor arrivals rose 1.5% YoY to 7.8 million and seven of the top 10 source markets registered growth. Coupled with an increase in the average length of stay in the city-state, total visitor days grew 2.5% YoY, according to data from Singapore Tourism Board (STB). STB has forecast visitor arrivals to rise by 1%-4% YoY for the whole of 2019.

International tourist arrivals grew 4% in the first three months of 2019, with Asia Pacific being one of the bright spots that registered a 6% increase, Ascott Residence Trust said in its 30 July results statement, citing data from the World Tourism Organization. Asia Pacific continues to see strong demand for lodging, where business and leisure travel demand remains underpinned by economic growth and an expanding middle class, it added.

Despite favourable demand-supply dynamics in the domestic hospitality sector, headwinds in the global economy could dent leisure and corporate travel demand, Frasers Hospitality Trust noted in its 30 July results statement. It pointed out that the slowdown in China’s economic growth, a weaker yuan and waning consumer confidence may hurt outbound travel demand in the world’s second-largest economy.



June Quarter Earnings of SGX’s Largest Hospitality REITs