By: Derek Lim
Though I agree with their report that Singapore's hotel room and occupancy rates will increase substantially in the future due to the upcoming F1 and IR, but their report fail to take into consideration new hotels that will be coming up. Genting and the Marina IR are building new hotels and existing hotels are also being upgraded to increase their occupancy rate. While I'm confident that ART, CDL and CCT shares will rise, the figures stated in Merrill Lynch report may be over estimated.
"In its report, Merrill Lynch also picked Singapore-listed stocks that are likely to benefit from the uptrend in hotel room rates, reiterating its 'buy' calls on Ascott Residence Trust (ART), CDL Hospitality Trusts and CapitaCommercial Trust (CCT) - citing the stocks' large exposure to the Singapore hotel market.
'CDL Hospitality Trusts is the largest hotel owner, by number of rooms, in Singapore and the purest listed play on the Singapore hotel sector,' the report said. ART, which has 25 per cent portfolio exposure to the Singapore market, was also favoured for its major portfolio exposure outside Singapore, including Vietnam and China.
Merrill Lynch is also upbeat on CCT, which currently generates 18 per cent of gross revenue from its exposure to the Singapore hotel market via its 60 per cent holding in Raffles City Singapore.
'We believe that the positioning of the Raffles complex is unique by virtue of both its proximity to Marina Bay and the proposed F1 circuit. With the possible integration of the Circle Line MRT and ongoing retail asset enhancement works, we believe that hotel room rates are set to increase in line with, if not above, our forecasts,' it said."
Source.