MARKET PULSE: Hospitality Sector, Starhill Global (5 Mar 2013)

Stock Name: GP Hotels
Company Name: GLOBAL PREMIUM HOTELS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.33

Stock Name: Starhill Gbl
Company Name: STARHILL GLOBAL REIT

Research House: OCBC

Price Call: BUY

Target Price: 0.98

MARKET PULSE: Hospitality Sector, Starhill Global

5 Mar 2013

KEY IDEA Hospitality Sector: Potential oversupply situation Summary: Despite visitor arrivals climbing 9% in 2012, the total gross lettings for Singapore hotels was stagnant at 10.7m room nights. It is likely that the average length of stay has declined further from the 3.7 days in 2011, e.g. down to 3.45 days, and larger proportions of tourists may be staying in non-hotel accommodations. We understand from talking to industry players that 1Q13 operational figures for Singapore hotels are likely to be lackluster. For 2013-2015, we forecast hotel room demand growth of 5.4% p.a., lower than the projected 5.8% p.a. increase in room supply. We remain NEUTRAL on the hospitality sector. Our top pick is Global Premium Hotels [BUY, FV: S$0.33], which we believe is a longer-term asset value play. GPH is currently trading 32% below its NAV of S$0.39. (Sarah Ong) MORE REPORTS Starhill Global REIT: Poised for growth Summary: We are positive on Starhill Global REIT's (SGREIT) performance going forward. SGREIT announced that the acquisition of Plaza Arcade in Perth, Australia has been completed last Friday. At an NPI yield of 7.8%, we expect the transaction to be DPU accretive, adding 0.08 S cent to SGREIT's DPU on an annualised basis. Apart from the maiden contribution by Plaza Arcade, SGREIT is also likely to get a boost in its 1Q13 DPU, due to the distribution of ~S$3.8m accumulated net rental arrears expected to be received from Toshin during the quarter. Further upside in rent is possible when next lease renewal exercise comes in Jun, given that Orchard Road rental and occupancy rates have been holding up well. In addition, SGREIT may possibly benefit from interest savings following the refinancing of its term loan maturing in Sep. We maintain BUY with an unchanged fair value of S$0.98 on SGREIT. (Kevin Tan)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks closed higher Monday after strength in defensive stocks shook off early morning losses following a measure to cool China's real-estate bubble. The Dow rose 0.3%. - The latest purchasing managers' index (PMI) showed that Singapore's manufacturing economy contracted in Feb from the previous month. - CSC Holdings said it had inked over S$400m worth of deals so far this year, including works on the Klang Valley Mass Rapid Transit in Malaysia. - BBR Holdings said it won S$61.6m in new contracts between last Nov and Jan this year. - China Minzhong Food Corporation said that PT Indofood Sukses Makmur has doubled its shareholding interests from 14.95% to 29.33%. - Independent directors of Macquarie International Infrastructure Fund asked shareholders to vote to amend the management fee arrangements at the AGM later this week. - The Public Transport Council has raised the penalty for not meeting bus Quality of Service (QOS) standards by up to 20x to show that it is serious about non-compliance.