Excerpts from UOB Kay Hian report following Eagle Hospitality Trust's clarification (Eagle Hospitality REIT: Clarifies The Edge article on Queen Mary ship)
Analysts: Jonathan Koh, CFA & Nicola Ho.
|• An iconic landmark. The Queen Mary is a decommissioned ocean liner that has been converted into a 347-room hotel with banquet facility.
It is a landmark attraction at Long Beach, California.
We estimate Queen Mary accounted for 12.6% of EHT’s portfolio valuation and 15.9% of net property income.
In 2018, The Queen Mary achieved ADR of US$144.40, occupancy of 69.8% and RevPAR of US$100.70 in 2018.
• Worst-case target price at US$0.80. Assuming the valuation of Queen Mary is written down to zero and it no longer contributes to rental income, EHT’s 2020F DPU would drop by 22% from 6.60 US cents to 5.12 US cents, while NAV/share would drop 21% from US$0.87 to US$0.69.
Our target price would also drop from US$1.02 to US$0.80.
• We maintain our earnings forecasts.
• Maintain BUY. Our target price of US$1.02 is based on DDM (required rate of return: 7.5%, terminal growth: 1.0%).
SHARE PRICE CATALYST
• RevPAR uplift from recently-renovated hotels.
Full report here.