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Financial Highlights

Consolidated Income Statement

Statement of Comprehensive Income

Balance Sheet

Review of Performance

Revenue and Net Property Income - 3Q FY2016/17 vs. 3Q FY2015/16

Group

Gross revenue for 3Q FY2016/17 was S$59.2 million, an increase of S$4.4 million (8.0%) as compared to 3Q FY2015/16. Underlying performance of the portfolio improved by S$2.1 million over the same quarter last year in local currency terms on the back of higher contribution from all hotels except Singapore. The improved performance was further augmented by the stronger JPY and AUD against SGD.

Net property income for the quarter increased S$3.0 million (12.9%) over last year.

Australia

Gross revenue for 3Q FY2016/17 was S$42.0 million, an increase of S$2.9 million (7.3%) over 3Q FY2015/16. Net property income for the quarter of S$14.9 million was S$1.3 million (9.7%) higher than the same quarter last year. The improved performance was contributed by better underlying asset performance of three hotels and the stronger AUD against SGD.

Three hotels in the Australia portfolio recorded better performances in 3Q FY2016/17. The main improvement came from Pullman and Mercure Albert Park which experienced strong conferencing business in the current quarter. Pullman Sydney Hyde Park recorded improved performance due to higher room demand from public segment. With the secured business of air crew, Novotel Sydney Central continued to yield better during high demand periods, resulting in better performance compared to a year ago.

Pullman and Mercure King George Square recorded a marginal increase in gross revenue with improved occupancy in the quarter due to strong public segment demand in rooms in October 2016 on the back of several big concerts held in the city that month. Nevertheless net property income of the hotel was affected by lower room rates due to downward pricing pressure from the large hotel room supply in the Brisbane market and higher cost of servicing the rooms.

Courtyard by Marriott North Ryde and Novotel Sydney Parramatta continued to face strong competition from new and refurbished hotels within their respective vicinities; consequently these two hotels' performance saw a decline over the prior year.

China

Gross revenue for the China hotels for the quarter were S$0.2 million (3.8%) lower than last year mainly due to adverse currency movement. In local currency terms, the underlying performance of the hotels have improved RMB0.7 million (3.0%) over last year.

Net property income for the China hotels grew S$0.2 million year-on-year, despite the weaker RMB against SGD, as a result of the better underlying performance and effective cost control.

Ibis Beijing Sanyuan generated additional rental revenue by leasing the ground floor space to a local eatery since February 2016. The hotel also benefitted from the loyalty programme of the China Lodging Group with more than 8,000 room nights taken up by its members in the current quarter.

Japan

Gross revenue and net property income for the Japan hotels for the quarter were S$1.9 million (27.7%) and S$1.7 million (35.5%) higher than last year mainly due to better performance of Osaka Namba as well as the stronger JPY against SGD.

Contribution from Osaka Namba was substantially higher than last year as a result of the revised rent structure in the new master lease agreement with Sunroute whereby A-HTRUST would earn the higher of variable or fixed rent. The hotel achieved a variable rent of JPY 253 million for the quarter, which was significantly higher than the fixed rent of JPY 164 million. The better underlying performance this quarter was further augmented by the stronger JPY against SGD.

Singapore

Gross revenue and net property income for Park Hotel for the quarter were S$0.2 million (5.2%) lower than prior year.

The hotel faced weak demand from the corporate segment in addition to an oversupply of hotel rooms in the market and renovation of the hotel restaurant from October 2016 to November 2016, which impacted the performance of the hotel.

Income available for distribution

Income available for distribution for the quarter was S$19.5 million, an increase of S$2.5 million (14.6%) over same quarter last year. With the 5% retention of S$1.0 million for the quarter, income to be distributed for the quarter was S$18.5 million, an increase of S$2.3 million or 14.0% over last year.

The increase was mainly attributable to the following:

  1. Higher net property income of S$3.0 million (excluding non-cash items).
  2. Higher realised exchange gain of S$0.8 million.
  3. Lower net finance costs of S$0.3 million.

Partially offset by:

  1. Absence of partial distribution of proceeds from the sale of Pullman Cairns International hotel (3Q FY2015/16: S$0.7 million).
  2. Absence of distribution from Notron (3Q FY2015/16: S$0.5 million).
  3. Higher other expenses of S$0.3 million.
  4. Higher income retained for working capital of S$0.2 million.

Revenue and Net Property Income- 3QYTD FY2016/17 vs. 3QYTD FY2015/16

Gross revenue for YTD 3Q FY2016/17 increased by S$5.3 million (3.3%) compared to YTD 3Q FY2015/16. Excluding contribution from Cairns operations of S$1.0 million for YTD 3Q FY2015/16, current year gross revenue would be S$6.3 million (3.9%) higher than last year.

Overall underlying performance of the portfolio has improved S$3.3 million over the same period last year. The better performance was augmented by stronger JPY and AUD, but partially offset by weaker RMB.

In line with the higher revenue, net property income for YTD 3Q FY2016/17 increased S$5.9 million (8.8%) over last year. On a same store basis (excluding Cairns operations), net property income for YTD 3Q FY2016/17 would be S$6.3 million (9.4%) higher than prior year.

After retention of S$2.6 million, income distributed and to be distributed for YTD 3Q FY2016/17 stood at S$48.5 million, an increase of S$2.5 million (5.5%) as compared to YTD 3Q FY2015/16, primarily due to:

  1. Higher net property income of S$6.4 million (excluding non-cash items).
  2. Lower net finance costs of S$0.3 million.

Partially offset by:

  1. Absence of partial distribution of proceeds from the sale of Pullman Cairns International (YTD 3Q FY2015/16: S$1.3 million).
  2. Absence of distribution from Notron (YTD 3Q FY2015/16: S$0.5 million).
  3. Higher tax expenses of S$1.3 million.
  4. Lower realised exchange gain of S$0.1 million.
  5. Absence of realised fair value gain on financial instrument (1H FY2015/16: S$0.2 million).
  6. Higher other expenses of S$0.6 million.
  7. Higher income retained for working capital of S$0.2 million.

Commentary

International visitors to Australia grew 11% y-o-y for the 12-month period ended September 20161, and the growth trend is expected to continue in the near term as international flight routes to Australia grows2. In Sydney, the recently opened International Convention Centre Sydney, which boasts a rich event calendar in the coming year, will help to boost the hospitality sector in the city. In general, the hotel markets in Sydney and Melbourne are expected to be healthy in the near term, while the hotel market in Brisbane is expected to remain soft due to oversupply of rooms.

While factors such as air quality in the city may continue to deter foreign arrivals into Beijing in the near term, the hospitality sector of the capital city will continue to be supported by domestic travelling. As China continues to develop its transportation system, the accessibility of Beijing from the other parts of China will be enhanced, further promoting domestic tourism in the capital city.

Despite slower growth in international visitors in recent months in part due to strengthening of JPY, Japan welcomed almost 24 million international visitors in 2016, up by 21.8% compared to 20153. Looking forward, the hotel markets in Tokyo and Osaka are expected to remain healthy in the near term.

While inbound arrivals to Singapore has grown by 7.9% y-o-y for the period January to November 20164, the relatively large inventory of hotel rooms continued to weigh down performance of the Singapore hotel market. Headwinds are likely to persist in the near term as corporate demand is expected to remain subdued, compounded by new supply of rooms coming into the market.

1 Source: Tourism Research Australia
2 Source: Tourism Australia
3 Source: Japan National Tourism Organisation
4 Source: Singapore Tourism Board