KUALA LUMPUR: Affin Hwang Capital Research has reiterated its buy rating on YTL Hospitality REIT
with a lower price target of RM1.35 from RM1.61 after incorporating its revised earnings forecasts and raising the cost of equity.
The research firm said YTL REIT is an underappreciated owner of luxury hotels with an established operational track record.
"At an 8.0% FY18E yield, YTLREIT looks attractive, offering one of the highest yields
amongst its regional peers. Similarly, this REIT’s price-to-book of 0.76x is also among the lowest compared to peers," it said.
Affin Hwang Research said about 49% of YTL REIT's 6MFY18 net property income was derived from hotel assets under master leases, with stable, highly visible earnings streams while the remaining 51% of NPI was contributed by three hotels in Australia.
"Looking into 2018-19, we are positive on the Sydney hotel market and are neutral on Melbourne and Brisbane’s hotel markets," it said.
The research firm also noted that YTL REIT has acquired 13 assets post restructuring in 2011, of which 12 have seen an increase in market value and most are delivering NPI yeilds of over 6.5%
"We expect YTLREIT to deliver 12% EPU growth in FY18E, driven by the contribution from Majestic KL and higher earnings from its Australian hotels.
"However, we are cutting our FY18-20E core profit forecasts by 3- 11%, imputing a stronger Ringgit (vs the Australian dollar) and lower hotel occupancy rates in conjunction with a planned renovation at its Brisbane Marriott hotel."
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