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Financial Highlights

Consolidated Statements of Net Income for 3Q FY2018/19 and 3Q FY2017/18

Consolidated Statements of Comprehensive Income for 3Q FY2018/19 and 3Q FY2017/18

Balance Sheet

Review of Performance

Revenue and Net Property Income - 3Q FY2018/19 vs. 3Q 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 3Q FY2018/19 were S$50.1 million and S$23.2 million, a decrease of S$7.9 million and S$2.0 million respectively as compared to 3Q FY2017/18 mainly due to lower contribution from Australia portfolio and unfavourable FX movement in AUD (-5.1%). 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$2.3 million was attributable to lower contribution of the Australia assets (S$1.7 million) and unfavourable foreign exchange movement (S$0.6 million).

Despite new supply of rooms, average occupancy rate for our hotels in Sydney remained strong at close to 90%. Room rates were generally lower in order to drive volume.

Increased supply of rooms and reduced conferences and events business impacted the performance of Pullman & Mercure Melbourne Albert Park while pressure on room rates continued to weigh on the performance of Mercure Brisbane King George Square.

Japan

Sunroute Namba's performance in 3Q FY2018/19 was better than last year as the hotel benefitted from the increased inbound arrivals.

With the completion of acquisition of WBF East and WBF West in September 2018, these two hotels contributed a full quarter of earnings for 3Q FY2018/19 which resulted in higher NPI from the Japan portfolio.

The Group completed the acquisition of the last WBF hotel, WBF Honmachi on 20 December 2018. This hotel will start to contribute positively to the Group's NPI from 4Q FY2018/19.

Korea

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

The Group also completed the acquisition of Ibis Insadong on 12 December 2018 and will start to contribute positively to the Group's NPI from 4Q FY2018/19.

Singapore

Income from Park Hotel Clarke Quay for 3Q FY2018/19 remained stable.

Income available for distribution

Income available for distribution for the quarter was S$17.7 million. With the retention of S$1.3 million for working capital in the quarter, income to be distributed for the quarter would be S$16.5 million, an increase of S$0.5 million (3.1%) over the same period last year.

The increase was mainly due to the following:

  1. lower net finance cost of S$0.8 million;
  2. lower tax expense of S$0.4 million; and
  3. lower other trust expenses of S$1.4 million;

Partially offset by:

  1. lower NPI of S$2.0 million; and
  2. net foreign exchange loss of S$0.1 million.

Revenue and Net Property Income - 3Q YTD FY2018/19 vs. 3Q YTD 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 3Q YTD FY2018/19 were S$144.8 million and S$63.9 million, a decrease of S$25.3 million and S$8.2 million respectively as compared to 3Q YTD FY2017/18. This was mainly due to lower contribution from Australia portfolio, absence of earnings from China portfolio and unfavourable FX movement in AUD (-5.1%) and JPY (-0.4%).

After retention of S$3.7 million of working capital, income to be distributed for 3Q YTD FY2018/19 stood at S$48.3 million, an increase of S$1.5 million (3.3%) as compared to 3Q YTD FY2017/18, primarily due to lower net finance cost of S$3.3 million, lower tax expense of S$1.5 million, lower other trust expenses of S$1.3 million and S$3.6 million partial distribution from China sale proceeds. This was partially offset by lower NPI of S$8.2 million.

Commentary

In general, domestic travelling and inbound arrivals for Australia is expected to remain healthy in the near term as AUD remains relatively weak. While demand in the Sydney hotel market is expected to be strong in the near term, new supply is also expected to continue. Upcoming new supply of rooms in Melbourne is also expected to weigh on the hotel market, amidst intensified competition for conference and events business. The Brisbane hotel market is poised for recovery as the new supply of rooms is expected to slow down over the coming years.

Amidst increasing supply, inbound arrivals are expected to continue the growth trend in the near term in Japan. The 6-weeks Rugby World Cup 2019 to be held across 12 venues (including Tokyo and Osaka) from September 2019 will boost the hotel market. Up to 1.8 million spectators are estimated to turn up, including 400,000 from overseas1.

With continual growth in the inbound market and relatively limited new supply of hotels over the medium term, Singapore and Seoul are expected to continue their recovery trends.

1 Source: The Economic Impact of Rugby World Cup 2019 by Rugby World Cup 2019 Organising Committee