Brokers' take

Compiled by Annabeth Leow REGIONAL HOSPITALITY | POSITIVE

OCBC Investment Research, June 18

After several years of declining revenue per available room (RevPAR), RevPAR growth for Singapore hotels appears to have finally turned a corner.

Going forward, given that much of last year's supply injection was back-end loaded, we expect hotel RevPARs to accelerate from the pace seen in Q1 2018.

However, Singapore is not the only place where we see a demand-supply situation ripe for RevPAR growth. RevPAR growth in mainland China turned positive in Q1 2017 after several years of decline, and we believe the recovery is still in its early stages, particularly for luxury hotels.

We initiate coverage on Shangri-La Asia (buy; fair value: HK$21.05).

With the group's substantial exposure to mainland Chinese hospitality as well as a high degree of operational leverage, we see Shangri-La as a proxy to what we expect to be a multi-year recovery in the Chinese luxury hotel industry.

On the other hand, for hospitality S-Reits, while we see 2018 as a positive year operationally, we remain wary on the impact of rate hikes on Reits as an asset class.

Out of the hospitality S-Reits, we like Far East Hospitality Trust (buy; fair value: S$0.735) as we believe that the operational upside has yet to be priced in.

We are also positive on Hotel Properties Limited (buy; fair value: S$4.74), given its attractive valuations. We have a positive view on the regional hospitality sector.

SINGAPORE TELECOMMUNICATIONS | BUY TARGET PRICE: $4.22 JUNE 18 CLOSE: $3.19

UOB Kay Hian, June 18

Management plans to increase scale and profitability at global marketing technology company Amobee.

Amobee is scouting for strategic investors. Management targets to complete the initial public offering for Amobee within the next three years.

Barring unforeseen circumstances, management intends to maintain ordinary dividends at 17.5 Singapore cents for the next two financial years and thereafter revert to paying 60 per cent to 75 per cent of underlying net profit.

We see the promise as a demonstration of management's confidence that group earnings would not be unduly affected by increased competition in Singapore and Australia.

Singtel is the least affected by a fourth mobile operator in Singapore, as overseas businesses account for about 70 per cent of its bottom line.

It is the largest and most liquid defensive stock listed on the Singapore Exchange and deserves to trade at a premium.

Maintain "buy". Our target price is $4.22 based on discounted cash flow (required rate of return: 6.25 per cent; growth: 1.8 per cent).

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