Ascendas Hospitality Trust's property income to drop to $98.5m in 2018

But contributions from Japan and Singapore markets may offset headwinds.

DBS Group Research reported a forecast of Ascendas Hospitality Trust (ASCHT)’s net property income (NPI), falling from $99.2m in 2017 to $98.5m in 2018.

According to DBS Research, its Australian operations, which is its largest contributor, in Brisbane and suburban Sydney markets may be affected by near-term supply pressures, as well as Melbourne’s lower conference activities. However, ASCHT’s Australian portfolio contributed 52% of 9M2018 NPI, and DBS Research predicts its properties in Sydney and Melbourne may drive its profit in the near term.

Due to currency fluctuations, ASCHT’s gearing inched up from 32.6% to 33.2% at the end of 2Q2018, but is expected to decline to 21% to 22% once ASCHT completes the sale of its Beijing hotels in May this year, DBS Research said.

Meanwhile, DBS Research reported that Japan will remain as a medium growth driver, because of the country’s government support to the tourism sector through the relaxation of visa requirements. ASCHT’s Osaka Namba Washington Hotel, which will be rebranded under the Sunroute name, may also boost its performance due to the 13% increase in its annual fixed rents.

Singapore, on the other hand, will only contribute fairly due to the near-term oversupply operation that will limit the variable rent from the Park Hotel Clarke Quay.

“While we expect ASCHT to continue to face some near-term headwinds from a weaker JPY and AUD relative to the levels a year ago and some softness at its Melbourne property from a reduction in conference activities, we expect a recovery going into FY19 as the Singapore hospitality market recovers and ASCHT benefits from its Ariake property being converted to a Sunroute brand versus a mix of Sunroute and Oakwood Apartments,” DBS Research said.

Further, gross revenue is expected to stay at $224m this year.

Singapore Business Review previously reported that the company’s NPI dropped 4.7% YoY to $25.21m in 3Q2017.