REITs

REITs: CIMB likes luxury hotels and highlights that despite a 0.7% y/y drop in occupancy, hotel RevPAR improved 2.1% y/y for the first 4 months of the year, attributable to upscale and luxury hotel segments. There was a slowdown in Chinese visitors, possibly due to China’s new tourism law, and the MH370 incident. That said, while there are less Chinese travelling via tours, more are travelling on their own and the latter group tends to spend more. CIMB guides that this spending trend is expecting to continue as the government aims to position Singpaore as a top luxury lifestyle destination. In tandem, upscale and luxury hotel segments are expected to benefit. Aside, other boons for luxury hotels include 1) stronger Indonesian visitor arrivals, 2) packed 2014 event calendar, and 3) a potentially stronger corporate spending trend. Of beneficiaries, CIMB maintains Add on OUE-HT (TP $0.96) as the company boasts the ability to boost RevPAR through sponsor-funded AEI of Mandarin Orchard, and Add on CDL-HT (TP $1.97) on continual good performance from its Singapore and Maldives portfolio. CIMB has a Reduce call on FEHT (TP$0.80) as its mid-tier portfolio, particularly those along Orchard Road, to come under pressure amid intensifying competition.