Results First Take: Sequential improvements continue, gearing levels back in the safe zone
- Full year DPS of 0.355 US cts below estimates post capex reserves of US$11.2m
- Highest RevPAR recorded in 2H21, up 44.2% h-o-h; STR expects RevPAR to fully recover this year
- Gearing back in safe zone at 44% as portfolio was written up 5.2% this financial year end
- We currently have a BUY recommendation with TP of US$0.75, as we look to review estimates
DPU missed estimates post capex reserve income retention of US$11.2m
- ARAHT reported full year gross revenue of US$130.7m (+67.2%) and NPI of US$24.8m (turnaround from losses).
- NPI turned positive as opposed to FY20 (at a reported loss of US$5.0m), with bulk of contribution in 2H21 (US$15.8m).
- Approximately US$11.2m was set aside as capital expenditure reserve for FY21, which translates to c.1.5% of portfolio valuation.
- Post capex retention, distributable income at US$2.0m was below our estimates at US$4.2m.
- Full year DPS at 0.355 UScts thus below our estimates at 0.7 UScts.
RevPAR in 2H21 highest recorded since onset of the pandemic
- We remain positive on ARAHT given the sustained improvements in performance every quarter since 2Q20.
- December was a strong month with US market RevPAR at 5.2% above pre-pandemic levels.
- RevPAR in 2H21 was the highest since the onset of the pandemic at US$75 (+44.2% h-o-h).
- Occupancy has also improved 11.7 ppt h-o-h to 62.9%.
- Full year NPI of US$24.8m came close to our forecast of US$25.8m.
- NPI margin increased from 17.3% in 1H21 to 20.3% in 2H21.
Gearing falls to safe levels below 45% on the back of portfolio revaluation
- Portfolio valuation was written up 5.2% to US$722.6m, but remains at c.92% of pre-COVID levels.
- Correspondingly, gearing came down substantially from 48.2% in FY20 to 44.3% at end of FY21.
- NAV per unit has bounced back to US$0.70 per share, up 15% y-o-y.
- Cost of debt and interest cover remains unchanged at 3.4% and 2.0x respectively, with c.79% of debt hedged on fixed rates.
- ARAHT will be open to potentially divest non-core assets within the portfolio, which we think may include the slower recovering Hyatt brand hotels within the initial IPO portfolio.
- Asset rejuvenation may rotate to diversify amongst portfolio brand names, after their maiden acquisition into Marriott branded hotels in early 2020.
Industry consultant expects RevPAR to return to pre-COVID levels this year
- Hospitality analytics firm STR expects RevPAR to recover to pre-COVID levels in FY22, and a surge beyond pre-COVID levels in the coming years (107% in 23F and 112% in 24F of 2019 levels).
- US borders have reopened to all vaccinated international travellers in November 2021.
- Similar to global travel and tourism guidance, US expects to see international visitorship back at pre-COVID levels in 2024F.
More details after the analyst briefing tomorrow. Our estimates are under review.