PETALING JAYA: Affin Hwang Capital Research has reaffirmed its “buy” rating on YTL Hospitality REIT Bhd at RM1.19 with a higher target price of RM1.38 (from RM1.32) after incorporating the earnings contribution from its recently-acquired Green Leaf Niseko Village hotel.
The research house said with an initial gross yield of 5.25%, against a borrowing cost of around 1%, it expects the deal to be yield accretive.
“Elsewhere, we have trimmed our profit forecasts for the Australian hotels, in view of the lower-than-expected revenue per available room (RevPar) in year-to-date FY19 estimate.
“Overall, we are lifting our FY19-21 estimate distributable earnings per unit by 0.5-2.9%. At a 6.8% FY19 yield, YTLREIT’s valuation looks attractive, in our view,” it said in a report yesterday.
To recap, YTL REIT had bought from YTL Corp Bhd the Green Leaf Niseko Village hotel located in Niseko-cho, Hokkaido, for six billion yen (RM222.5mil).
The 200-room, five-storey hotel will be leased to the vendor under a 30-year lease agreement, with an option to renew for a further term of 30 years. The initial annual rental payment is 315 million yen for the first five years, with a step-up provision of 5% every five years.
According to the research house, the RevPAR for YTL REIT’s Australian hotel slipped by 3.3% year-on-year in 1QFY19 due to lower average hotel occupancy of 83.6% from 87.7% in 1QFY18.
The dip in average hotel occupancy is attributable to the renovation at Brisbane Marriott Hotel, which is targeted for completion in early 2019 and lower take-up rates for its Sydney and Melbourne hotels.
“While we remain positive on its Australian hotels’ profitability, their FY19 estimated contributions may come in below our earlier forecasts due to lower-than-expected growth in average day rate,” it said.
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