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Financial Highlights

Consolidated Statements of Net Income for 4Q FY2018/19 and 4Q FY2017/18

Consolidated Statements of Comprehensive Income for 4Q FY2018/19 and 4Q FY2017/18

Balance Sheet

Review of Performance

Revenue and Net Property Income - 4Q FY2018/19 vs. 4Q 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
1 Sale of China assets was completed on 18 May 2018

Group

Gross revenue and net property income ("NPI") for 4Q FY2018/19 were S$49.0 million and S$22.9 million, a decrease of S$5.7 million and S$0.8 million respectively as compared to 4Q FY2017/18 mainly due to lower contribution from Australia portfolio and unfavourable FX movement in AUD (-7.0%). The absence of earnings from China portfolio has been replenished by new contributions from hotels in Korea and Japan.

Australia

Australia portfolio continues to be affected by challenging market conditions, as well as depreciation of AUD against SGD in this quarter. The decrease in NPI of S$1.9 million was attributable to lower contribution of the Australia assets (S$1.2 million) and unfavourable foreign exchange movement (S$0.7 million).

Our Sydney hotels continue to face competitive market condition. Although the Sydney hotels managed to maintain a healthy average occupancy rate, the performance was affected by a reduction in room rates.

Stronger demand for residential conference drove overall performance for Pullman & Mercure Melbourne Albert Park and NPI grew against last year while Pullman & Mercure Brisbane King George Square managed to increase room revenue and NPI through occupancy growth.

Japan

Sunroute Ariake's performance was slightly higher than last year due to better seasonal performance since the rebranding from Oakwood last year.

Sunroute Namba's performance was slightly muted due to new hotel supply at Osaka.

With the completion of acquisition of WBF East and WBF West in September 2018 and WBF Honmachi in December 2018, these three hotels contributed a full quarter of earnings for 4Q FY2018/19 and higher NPI from the Japan portfolio.

Korea

Splaisir Dongdaemun and Ibis Insadong started contributing to the Group following the completion of the acquisition in May 2018 and December 2018 respectively.

Singapore

Income from Park Hotel Clarke Quay for 4Q FY2018/19 declined slightly as the transient and corporate segment were soft in the quarter.

Income available for distribution

Income available for distribution for the quarter was S$21.6 million. With the retention of S$1.5 million for working capital in the quarter, income to be distributed for the quarter would be S$20.1 million, an increase of S$0.6 million (3.5%) over the same period last year.

The increase was mainly due to China sale proceeds distribution of S$4.6 million, lower net finance cost of S$0.4 million, lower retention of S$0.2 million and lower other expenses of S$0.3 million. This was partially offset by lower NPI of S$0.8 million and absence of one-off look fee of S$4.1 million.

Revenue and Net Property Income - FY2018/19 vs. 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 FY2018/19 were S$193.8 million and S$86.7 million, a decrease of S$31.0 million and S$9.0 million respectively as compared to FY2017/18. This was mainly due to lower contribution from Australia portfolio and unfavourable FX movement in AUD (-5.6%). The absence of earnings from China portfolio was predominantly recovered through new assets acquired throughout the year.

After retention of S$5.1 million of working capital, income to be distributed for FY2018/19 stood at S$68.5 million, an increase of S$2.2 million (3.4%) as compared to FY2017/18, primarily due to lower net finance cost of S$3.8 million, lower tax expense of S$1.6 million, lower other trust expenses of S$1.7 million and China sale proceeds distribution of S$8.2 million. This was partially offset by lower NPI of S$9.0 million and absence of one-off look fee of S$4.1 million.

Commentary

A relatively lower AUD will help to drive inbound arrivals into Australia as well as domestic travelling. While demand is expected to remain healthy in the Sydney hotel market, any improvement in performance may be hampered by upcoming supply. Over the medium term, substantial upcoming supply in Melbourne will place pressure on the performance of the hotel market in general, while improvement in Brisbane hotel market is conditional upon sustained recovery in demand as supply tapers.

Growth in inbound arrivals into Tokyo and Osaka are expected to support the performance of the hotel markets in these cities in the near term, although upcoming supply in Osaka may place pressure on room rates. The cities will also benefit from major events to be held in or near the cities in 2019, including the G20 Summit to be held in Osaka in June as well as the Rugby World Cup 2019 which will be held in 12 venues across Japan starting in September.

The growth trend in inbound arrivals into South Korea continued in 2019, with an increase of 14.1% for the first three months of the year1. The increase was driven by strong growth from its key source markets such as China, Japan and Taiwan. In the near term, expected continual growth in inbound arrivals and moderated supply of new hotel rooms are expected to drive the hotel market in Seoul.

Having welcomed a record number of visitors of 18.5 million in 2018, the visitorship to Singapore is forecasted to grow between 1% and 4% in 20192. Increased connectivity to Singapore, via addition of new airlines and connection to new destinations, is expected to continue driving demand in the near term. The proposed expansion of the two integrated resorts will help to further enhance Singapore's attractiveness as a destination over the longer term.

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