OCBC Report 12 Dec 13

KEY IDEA Hospitality Sector: Opening weakly in 2014 Summary: The dreariness that characterized the Singapore hospitality industry over 2013 looks set to continue into 1Q14 with the subdued global business sentiment, a strong Singapore dollar and increasing competition with an expanding supply of hotels. Our channel checks indicate that hotel bookings up to Feb 2014 are still weak, despite an expected pickup to the number of MICE events for 2014. We project that for end-2012 to end-2015, hotel room demand will grow at a CAGR of 5.4%, while hotel room supply will expand at a CAGR of 6.5%. Given this, the industry is facing a mild oversupply situation. We project that 2014 RevPAR growth for the industry will be in the low single-digit percentages at best, and do not rule out another year of contraction. We are maintaining our NEUTRAL rating on the Singapore hospitality sector and do not see any significant growth catalysts in the short-term. Our top pick is Global Premium Hotels [FV: S$0.33]. The 1H14 opening of its second mid-tier hotel, Parc Sovereign Tyrwhitt, could boost GPH’s net income by ~17% in 2014. (Sarah Ong)

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NEWS HEADLINES - US stocks dropped on Wed, as investors digested the Washington budget deal that could give the Fed another reason to scale back its bond-buying program soon. - Economists, polled by the MAS from late-Nov, now expect Singapore's economy to expand by 3.8% in 2013 - up from the 2.9% median forecast seen in Sep survey. - The total number of IPOs on Asian exchanges fell this year, but the increased activity seen in the rest of the region will continue into 2014, said EY. - Singapore is committed to maintaining a pro-business climate that welcomes local investments as well as those from overseas, says Prime Minister Lee Hsien Loong. - Linc Energy, which is moving its listing from the ASX to SGX, plans to raise about S$47.9m in net proceeds through a mainboard IPO of 47.85m shares. - Heng Fai Enterprises, backed by the former controlling shareholder of SingHaiyi, Chan Heng Fai, could do a secondary listing in Singapore as it shifts focus to REITs.