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Financial Highlights

Consolidated Statements of Net Income for 2Q FY2018/19 and 2Q FY2017/18

Consolidated Statements of Comprehensive Income for 2Q FY2018/19 and 2Q FY2017/18

Balance Sheet

Review of Performance

Revenue and Net Property Income - 2Q FY2018/19 vs. 2Q FY2017/18

1 Computation is based on the financials rounded to the nearest dollar. Any differences between the individual amounts and total thereof are due to rounding
2 Sale of China assets was completed on 18 May 2018

Group

Gross revenue and net property income ("NPI") for 2Q FY2018/19 were S$46.4 million and S$20.5 million, a decrease of S$12.1 million (20.7%) and S$4.1 million (16.6%) respectively as compared to 2Q FY2017/18. This was mainly due to lower contribution from Australia portfolio and absence of earnings from China portfolio, exacerbated by unfavourable FX movement in AUD (-6.8%).

Australia

Australia portfolio was affected by challenging market conditions, as well as depreciation of AUD against SGD in this quarter. The decrease in NPI of S$2.6 million was attributable to under performance of the Australia assets (S$1.8 million) and unfavourable foreign exchange movement (S$0.8 million).

Soft market conditions in Sydney persisted in 2Q FY2018/19, and new supply of rooms affected Sydney hotels, leading to decline in demand across most segments. Lower room rates were offered by our hotels to maintain volume. Conferences and events ("C&E") were also affected by loss of events group which did not repeat this quarter.

Pullman & Mercure Melbourne Albert Park and Pullman & Mercure Brisbane King George Square kept occupancy level healthy at around mid-80%. However, lower room rates and loss of C&E business affected the performance of these hotels.

Japan

Sunroute Ariake's NPI was in line with same period last year.

Sunroute Namba's performance in 2Q FY2018/19 was marginally weaker due to a powerful earthquake and strong typhoon which occurred in Osaka during the quarter.

The Group completed the acquisition of 2 out of 3 WBF hotels (WBF West and WBF East) on 28 September 2018. These 2 hotels will start to contribute positively to the Group's NPI from 3Q FY2018/19.

Korea

Splaisir Dongdaemun started contributing to the Group following the completion of the acquisition on 21 May 2018.

Singapore

Park Hotel continued to perform better due to the recovery of Singapore hotel market.

Income available for distribution

Income available for distribution for the quarter was S$17.8 million. With the retention of S$1.2 million for the quarter, income to be distributed for the quarter would be S$16.6 million, an increase of S$0.5 million (3%) over the same period last year.

The increase was mainly due to the following:

  1. lower net finance cost of S$2.0 million;
  2. lower tax expense of S$1.0 million;
  3. lower other trust expenses of S$0.1 million; and
  4. S$1.8 million partial distribution from China sale proceeds

Partially offset by:

  1. lower NPI of S$4.0 million; and
  2. net foreign exchange loss of S$0.4 million.

Revenue and Net Property Income - 1H FY2018/19 vs. 1H FY2017/18

1 Computation is based on the financials rounded to the nearest dollar. Any differences between the individual amounts and total thereof are due to rounding
2 Sale of China assets was completed on 18 May 2018

Gross revenue and NPI for 1H FY2018/19 were S$94.6 million and S$40.7 million, a decrease of S$17.3 million (15.5%) and S$6.1 million (13.1%) respectively as compared to 1H FY2017/18. This was mainly due to lower contribution from Australia portfolio and absence of earnings from China portfolio, exacerbated by unfavourable FX movement in AUD (-4.9%) and JPY (-1.1%).

After retention of S$2.4 million, income to be distributed for 1H FY2018/19 stood at S$31.9 million, an increase of S$1.1 million (3.4%) as compared to 1H FY2017/18, primarily due to lower net finance cost of S$2.5 million, lower tax expense of S$0.8 million, lower other trust expenses of S$0.3 million and S$3.6 million partial distribution from China sale proceeds. This was partially offset by lower NPI of S$6.1 million.

Commentary

The soft market conditions in Sydney are expected to persist in the near term and this will continue to exert pressure on the hotel market in the city. The hotel market in Melbourne is faced with large supply of new rooms over the next few years and the city also continues to experience strong competition from Sydney for C&E business. While supply of new hotel rooms in Brisbane is expected to moderate, the hotel market remains challenging in the near term due to the recent increase in room inventory.

Over the past few months, Japan was affected by strong earthquakes and typhoons. As a result, travelling sentiments into the country have turned cautious. The hotel markets in Tokyo and Osaka are also faced with increasing supply of rooms although stricter regulations for "minpaku" (private lodging) may provide some respite.

South Korea continued to post strong recovery in inbound arrivals with a growth of 12.1% y-o-y for YTD September 20181 amidst improving ties with its neighbouring countries. Inbound from China, its top source market, posted its seventh consecutive month of y-o-y growth in September resulting in an improvement of 9.4% y-o-y for YTD September 20181. The country also saw healthy growth from its other key source markets as well as the South East Asia region. Majority of the inbound arrivals into South Korea are to Seoul and as inbound arrivals continue to improve, they will benefit the hotel market in the city.

Inbound arrivals to Singapore posted an increase of 7.5% y-o-y for YTD August 20182. The encouraging trend for inbound arrivals will improve the performance of the hotel market in Singapore as it continues to recover, with a market-wide RevPAR growth of 3.5% y-o-y for YTD August 20182. As supply of new hotel rooms tapers, the growth in inbound arrivals will continue to drive the recovery of the hotel market.

1 Source: Korea Tourism Organization
2 Source: Singapore Tourism Board