YTL HOSPITALITY REAL ESTATE INVESTMENT TRUST (REIT)

Fair value: RM1.32

POST-meeting with the management of YTL Hospitality REIT, AmInvestment Bank Research is sanguine on the REIT’s earnings outlook of up to the financial year 2020 (FY20).

The upbeat sentiment is mainly due to a strong performance from the REIT’s Australian segment, specifically via an increase in the average daily rate (ADR) of the Marriot Hotel in Sydney.

Apart from that, YTL Hospitality REIT’s master leases, with a 5% step-up clause for properties in Malaysia and Japan, are expected to support its earnings moving forward.

“The completion of the Marriot Hotel in Sydney, which has an occupancy rate of 89%, has driven net property income of the second quarter of FY18 to improve 23% quarter-on-quarter.

“There is currently a shortage in the supply of rooms in Sydney, particularly in the luxury segment with newer hotel buildings expected to be gradually completed over the next two to three years.

“Hence, given the average occupancy rate for 2017 standing at 89%, coupled with the shortage of supply, there is further room for the ADR at Marriot Hotel in Sydney to increase up to A$300 from about A$280,” said the research house.

As for the Brisbane Marriot Hotel, AmInvestment Bank Research expects occupancy to improve in the coming quarter with the upcoming Commonwealth Games to held there in April.

Moving forward, YTL Hospitality REIT’s management has guided that the ADR for the Brisbane hotel will be lower to encourage occupancy.

The research house added that the REIT’s master leases will continue to provide stability to the net property income for hotels in Malaysia and Japan.