Compiled by Navin Sregantan
FAR EAST HOSPITALITY TRUST | HOLD (MAINTAINED)
JUNE 12 CLOSE: S$0.64
FAIR VALUE: S$0.67
OCBC Investment Research, June 12
Far East Hospitality Trust (Far East H-Trust) has underperformed the FTSE Straits Times Reits Index by 8.8 percentage points since our downgrade from "Buy" to "Hold" on April 15.
Singapore Tourism Board's April numbers reflect decent visitor growth but a generally disappointing revenue per available room (RevPAR) performance for the first month of Q2.
In our last report, we did highlight that April would continue to be challenging for Singapore hotels given the absence of biennial event Food&HotelAsia.
In addition, the Trump-Kim summit held in June last year was another boon for Far East H-Trust's hotels that will be absent this year.
We continue to see the second half of 2019 as being more promising for RevPARs than the first half, but continue to keep an eye on the US-China trade tensions and its implications for discretionary spending across the region.
While Far East H-Trust's unit price has come off with the counter trading at more reasonable valuations as compared to Ascott Residence Trust and CDL Hospitality Trust, we believe the muted outlook for Q2 and ongoing macroeconomic uncertainties will weigh on the stock.
CHINA AVIATION OIL (CAO) | BUY (MAINTAINED)
JUNE 12 CLOSE: S$1.32
TARGET PRICE: S$1.60
RHB Research Institute, June 11
In our recently published regional oil & gas report, we trimmed 2019-2020 Brent crude oil price forecasts by around three per cent.
This downgrade was in line with our expectation of a prolonged US-China trade war, leading to possibly lower than-expected global economic growth.
Our revision of crude oil price forecasts has resulted in about a 2 per cent adjustment in estimated FY2019-2020 earnings.
We remain upbeat on the long-term growth of China's aviation passenger traffic, in line with its rising per capita income and expanding aviation infrastructure.
We conservatively expect CAO's near-term earnings to be driven by increasing jet fuel supply to China and more jet fuel being pumped by Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIA), which accounts for 65 per cent of pre-tax profit.
Key downside risks are lower-than-estimated jet fuel volume growth and the opening up of the Chinese aviation fuel supply market, which would put an end to CAO's current monopoly.
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