previous tp (usd) - 3 month (%) -4.2 initiation upside ...€¦ · ripe for growth. eagle...

INITIATION REIT ▪ Singapore

Eagle Hospitality Trust (EAGLEHT SP)

October 2, 2019 KGI Securities (Singapore) Pte. Ltd.

Ripe for growth. Eagle Hospitality Trust’s (EHT) IPO portfolio ticks many boxes; well-positioned in prime submarkets, recently refurbished, actively managed, and diversified for revenue resilience.

A favourable balance between stability and growth. We like that the 100% master lease arrangement fixes majority (66%) of rents through a revenue floor, while allowing variable upside should assets outperform.

Double digit dividend yield play. We initiate coverage on EHT with an Outperform recommendation and 12m target price of 84 US cts.

Investment Thesis Primarily freehold hotels located in prime submarkets. EHT holds a portfolio of 18 full-service U.S. hotels with a total valuation of US$1.27bn spread across 5,420 rooms. The portfolio is primarily freehold, except for the Queen Mary Ship which is under a residual lease tenure of c.63 years. 12 out of 18 assets held by EHT are located within the top 10 states in the U.S. by percentage contribution to GDP (2018 ranking), with 7 assets located within California, the single largest state in the U.S. All hotels were renewed under a master lease arrangement at IPO listing (23 May 19), with an initial term of 20 years and option to extend for another 14 - 20 years, ensuring long residual lease tenures across EHT’s entire portfolio.

Revenue diversification with in-built stability. Under the master lease arrangement, the fixed portion of rent income is expected to be 75% and 66% for FY19F/FY20F. The portfolio also enjoys diversification across: (1) revenue segments, (2) hotel branding, and (3) end user groups. As a characteristic of full-service hotels, EHT derives non-room revenue (34% of FY20F rev) from services and amenities, diversifying risk away from room revenue (66% of FY20F rev). Hotel branding is also diversified across the top three global hotel franchisors, with a shared loyalty base of 302mn members worldwide, adding assurance to the quality and comfort of rooms. Individual assets are positioned to target a spectrum of end user groups, specifically corporate demand (47.5% of rooms), leisure (39.5% of rooms) and airport travellers (13.0% of rooms).

Rental upside from refurbishment and rebranding initiatives. The US$174mn capex spent on asset enhancement works since 2013 is expected to translate to higher average daily room rates (FY18: US$133 FY20F: US$149) and support forward RevPAR (FY18: US$101 FY20F: US$117). Management also remains flexible in mitigating the impact of seasonality on occupancy rates through securing airline contracts for EHT’s airport hotels and an events contract with Golden Voice to increase the number of concerts held

onshore parallel to the Queen Mary Ship amongst other initiatives.

Valuation & Action We initiate coverage on EHT with an outperform recommendation and a target price of 84 US cts, representing an upside of 25.9%, inclusive of FY19F’s annualised dividend yield of 10.3%. We used the dividend discount valuation model with a cost of equity of 9.3% and terminal growth rate of 1.5%.

EHT (YTD: -13.5%) continues to trade below its IPO price and is currently at a 20% discount to its book value (FY19F P/B: 0.8x), as opposed to the industry average of 1.0x FY19F P/B for hospitality S-REITs. From a dividend yield perspective, EHT’s forward annualised 10.3% dividend yield looks attractive from a risk-to-reward perspective, and is ranked the highest amongst all S-REITs (average 6.2%).

Key Risks Key risks include the finalisation of U.S. tax regulation (Section 267A) anticipated at year end, recession worries and foreign exchange risk. On the operational front, we see disruption to the 6 assets identified for further AEI as a risk, alongside, declining RevPAR and occupancy numbers in line with macro-forecasts.

Financials & Key Operating StatisticsYE Dec USD mn 2017 2018 2019F 2020F 2021FGross revenue 63.1 95.4 96.4 Net property income 51.1 81.3 81.9 Distributable income 37.2 57.6 58.3 DPU (US cents) 4.3 6.6 6.7 DPU growth (%) - 54.7 1.3 Div Yield (%) 6.3 9.8 9.9 NAV (US cents) 102.6 107.9 112.5 Price / Book (x) 0.7 0.6 0.6 NPI Margin (%) 64.0 64.0 64.0 Net Margin (%) 252.8 53.0 55.7 Gearing (%) 34.1 33.0 32.2 ROE (%) 17.8 5.4 5.5 Source: Company Data, KGI Research

* FY19 DPS of 4.3 US cts is attributable to IPO listing date (23 M ay 2019)

Rock bottom valuations; Bound to soar Geraldine Wong / 65 6202 1193 / [email protected] Amirah Yusoff / 65 6202 1195 / [email protected]

Outperform - Initiation

Price as of 2 Oct 19 (USD) 0.68 Performance (Absolute)

12M TP (USD) 0.84 1 Month (%) 0.7

Previous TP (USD) - 3 Month (%) -4.2

Upside, incl div (%) 25.9% 12 Month (%) -

Trading data Perf. vs STI Index (Red)

Mkt Cap (USD mn) 586 Absolute (%) 1M 0.7

Issued Shares (mn) 869 Absolute (%) 3M -4.2

Vol - 3M Daily avg (mn) 3.4 Absolute (%) 12M #N/A N/A

Val - 3M Daily avg ($mn) 2.3 52 week lo $0.65

Free Float (%) 16.2 52 week hi $0.78

Major Shareholders Previous Recommendations

Claydon Hill Investments 15.1%

Compass Cove Assets 13.8%

Qian Jianrong 8.9%

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mailto:[email protected]

mailto:[email protected]

Eagle Hospitality Trust Singapore

October 2, 2019 KGI Securities (Singapore) Pte. Ltd. 2

Table of Contents

Investment Thesis ....................................................................................................................................................................... 3

Primarily freehold hotels located in prime submarkets 3

Revenue diversification with in-built stability. 4

Rental upside from refurbishment and rebranding initiatives. 8

Benchmark inclusion within the GPR/APREA Index may lift trading liquidity 11

Valuation ................................................................................................................................................................................... 12

Peer Comparison ....................................................................................................................................................................... 13

Key Risks .................................................................................................................................................................................... 14

Sensitivity Analysis: US Recession Impact ................................................................................................................................. 15

Company Overview ................................................................................................................................................................... 16

Company Snapshot ................................................................................................................................................................... 18

Financial forecasts ..................................................................................................................................................................... 19

Appendix: Key Management ..................................................................................................................................................... 20

Appendix: Portfolio operating statistics .................................................................................................................................... 21



Investment Thesis

Primarily freehold hotels located in prime submarkets Primarily freehold status. EHT’s initial IPO portfolio was an amalgamation of two separately held investment portfolios, namely, the USHI portfolio and the ASAP6 portfolio. The USHI portfolio, which consists of 12 hotels, was previously managed by Urban Commons, a privately-held real estate investment and development firm and also, the sponsor of EHT. The ASAP6 portfolio, which consists of the remaining 6 hotels, was previously indirectly held by the co-founders of Urban Commons and directors of EHT, Howard Wu and Taylor Woods in equal equity proportions. The initial IPO portfolio includes 18 hotels with a total valuation of US$1.27bn spread across 5,420 room keys. All hotels are positioned as full-service hotels offering a wide array of services and on-site facilities. All but one of EHT’s 18 assets are freehold, with the only exception being the Queen Mary Long Beach, which has a remaining lease tenure of c.63 years.

Figure 1: Portfolio focused in large metropolitan areas with strong growth prospects (% change in real GDP by MSAs,

2017)

Source: IPO Prospectus, KGI Research

Well-positioned in prime submarkets. 11 out of EHT’s 18 assets are located in the top 10 US markets based on Metropolitan statistical areas (MSAs) ranking, with only one asset that is not within the top 30 markets. The MSA ranking lays out the most populated urbanized area within the United States, signifying continuing geographical importance set by high density of human population above national average. Consistent with MSA rankings, 12 out of 18 assets held by EHT are located within the top 10 states within the US by percentage contribution to GDP (2018 ranking). 7 out of 18 assets, representing 34.1% of EHT’s total room count are located within California, the single biggest US state which contributed 14.5% to the total GDP in US last year.



Figure 2: 94.7% of EHT’s rooms are within Top 30 MSAs in the US, as compared to peer average at 76.4%


Figure 3: Top 10 US states ranked according to 2018 GDP

Source: Carpe Diem AEI, KGI Securities

Revenue diversification with in-built stability.

Master lease structure with long residual tenures. All of EHT’s assets are structured as a master lease agreement with a fixed rent floor and a variable rental component that is based on a percentage of gross operating revenue (GOR) and gross operating profit (GOP) above the fixed component. Each master lease agreement is set at an initial term of 20 years, with an option to extend for another 14 years (Californian assets) and 20 years (assets located out of California). All contracts were signed as of listing date this financial year, ensuing long residual lease tenures across EHT’s entire portfolio. The Queen Mary Ship is the only asset held under a 66-year leasehold arrangement, starting from 1 Nov 16. The asset is the only one within the portfolio that is operating on a triple-net lease structure, whereby the tenants will be responsible for all taxes, insurance and maintenance for the daily operations of the asset. Approximately two-thirds of rent revenue fixed. Based on management’s projections, the fixed portion of the master lease arrangement is expected to contribute 75%, 66% and 65.6% of total room revenue in FY19F, FY20F and FY21F. This is primarily driven by an expected increase in RevPAR across all assets following the intensive asset enhancement initiatives that took place through FY18 to 3M19. RevPAR is expected to grow at a CAGR in the range of -0.2% to 14.0% from FY16 to FY20F across all 18 assets, with the outperformers being the Holiday Inn Orlando Suites (Waterpark) and Hilton Atlanta Northeast. The fixed portion of the master lease agreements set a minimum revenue floor to room rents. Should a black swan event such as a US recession occur, top line risk is shared with the master lessee, as compared to a lease structure that is entirely variable. Only one of EHT’s asset, the Queen Mary Ship has an annual rental escalation of 2% per annum built within its fixed lease structure. According to our sensitivity analysis, a 6% increase in average occupancy will translate to a USD4.7mn rise in total revenue attributable to EHT to US$93.1mn.



Figure 4: Future revenue forecast (FY19F –

FY21F)


Figure 5: Forecasted revenue breakdown in FY20F by fixed and variable rent


Revenue stream diversification. As a characteristic of full-service hotels, EHT derives revenue from services and amenities. Room revenue made up two-third of EHT’s revenue stream in the latest reported 2Q19 results, with the remaining revenue streams derived through F&B revenue, carpark revenue and events revenue. Bulk of non-room revenue can be traced back to two amenity-rich assets – the Queen Mary Ship and Lagoon Waterpark within Holiday Inn Resort Orlando Suites. The Queen Mary ship is a retired British Ocean Liner parked alongside Long Beach, California. The property is one of the key tourist attractions along Long Beach, California and is famous for its rich history and paranormal activities. EHT owns the Queen Mary ship and the land title rights to 45 acres of land parallel to the ship. EHT is entitled to a cut on numerous revenue streams generated by the Queen Mary ship, including carpark fees from 1,600 open-air parking spaces, tourist attraction room rental fees and event fees. EHT secured a contract with Golden voice, one of the largest concert promoters in the world, worth at least US$1.25mn yearly with additional fees payables according to number of events held. Management expects 10 scheduled onshore concerts to be held in 2019, and 15 concerts in 2020, from 9-12 concert events held annually between 2016 and 2018. EHT also leases a dome-structured terminal to Carnival Cruise Line and receive embarking fees from transferring passengers. Holiday Inn Resort Orlando Suites has an on-site Lagoon Waterpark that offers seven slides, a splash zone and family pool areas. Revenue derived from the resort fees to the Lagoon Waterpark slide is levied onto each room night booked and is accounted for under EHT’s miscellaneous revenue stream. The attraction will be launching a Halloween themed event in FY19F that will aim to attract greater traffic to the Lagoon Waterpark. Management expects the variable rent component for the asset to increase from US$3.4mn in FY19F to US$5.0mn in FY20F, assuming an 85% take up rate on resort fees to the waterpark.

Figure 6: Revenue breakdown by

segment (Q219)


Figure 7: Operating revenue and expense forecast for FY19F (since listing date 23 May 2019 ) and FY20F


58.2 58.4 58.6

19.4

30.1 30.7

-

20.0

40.0

60.0

80.0

100.0

FY19 FY20 FY21

Variable rental rent (USD mn)

Fixed annual rent (USD mn)

4.2 3.0 2.1 3.3 2.8 1.6 1.4 10.6 3.9 2.3 7.5 0.8 1.8 2.5 2.2 3.4 2.6 2.4

2.7

2.3

1.2

2.2

1.8

0.90.6

1.8

2.2

1.2

5.0

0.2

0.8 1.41.2

1.7

1.61.3

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2.0

4.0

6.0

8.0

10.0

12.0

14.0

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Fixed annual rent (USD mn) Variable rental rent (USD mn)

67.0%

18.9%

8.1%

5.9%

Rooms Revenue F&B Revenue

Other Revenue Misccellaneous

143.1

239.7

80.2

49.8 159.5

46.9

RoomRevenue

F&BRevenue

OtherRevenue

GrossOperatingRevenue

OperatingExpenses

GrossOperating

Profit

Revenue and expense forecast FY19

219.0

355.1

116.7

74.9238.4

61.1

RoomRevenue

F&BRevenue

OtherRevenue

GrossOperatingRevenue

OperatingExpenses

GrossOperating

Profit

Revenue and expense forecast FY20



Brand diversification. Alongside the REIT manager’s rebranding efforts, 93.6% of EHT’s portfolio rooms are branded after IHG (41%), Marriott (29%) and Hilton (24%). The backing of the three largest global hotel chain franchisors adds assurance of room quality and comfort. The large client base of these top three brands gives EHT a combined client base of 302mn members worldwide, that may give EHT hotels an edge over other hotels that fall out of these loyalty programmes. Commissions payable to the associated brand franchisees, in the range of 5%, are also more competitive if booked directly through the brand website as opposed as third party online travel agencies that may charge 3% more.

Figure 8: Number of Rooms and Loyalty Program Members Associated with

Global Hotel Chains


Figure 9: Initial Portfolio Breakdown of Rooms by Global Hotel Chains


Market segment diversification with targeted demand drivers. All assets within the initial portfolio are positioned as upper midscale, upscale or upper upscale full service hotels. The REIT managers believe that full service hotels tend to be less subjected to cyclical downturns as opposed to luxury hotels. Other demand drivers that may be unique to full service hotels include weddings and corporate functions that help to diversify downside risk away from room rental revenues. The midscale to upper upscale hotel segments in which most of EHT’s asset fall under, also enjoy more attractive operating margins at c.32.0% to 39.4% in comparison with luxury hotels at c.30.4%. These segments are relatively more resilient to growing labour costs in the US as opposed to the luxury segment and insulated from price competition and substitutability from market players such as Airbnb and HomeAway.

Figure 10: U.S. Hotels GOP Margins by Chain Scale


Figure 11: Initial Portfolio Breakdown of Rooms by Chain Scale


All assets are also targeted at a specific end user group – Corporate (47.5%), Leisure (39.5%) and airport travellers (13.0%). Corporate demand continues to look bullish, riding on strong business sentiments and resilient corporate expenditure. Leisure demand continue to be supported by healthy consumer sentiments. The U.S. leading travel indicator which projects the future direction and pace of travel volume to and within the U.S. in the coming quarters expect domestic



travel to rise approximately 2.0% YoY through Jan 2020, with leisure contributing slightly more to the expansion than business. It is also comforting to know that EHT’s exposure to international tourists remains low within the single digit range. International travellers make up just 8.1% (based on USHI asset’s guest profile in FY18), with the vast majority originating from Canada and Mexico. Majority of EHT’s guest profiles are domestic travellers (91.9%), and demand remains largely well-shielded from trade war headwinds and outbound China tourism figures. New airline contracts had also been recently secured for two out of the three airport hotels – Holiday Inn Hotel & Suites San Mateo and Four Points by Sheraton San Jose Airport. These airport hotels will benefit through booking priority with airlines for service crew and staff accommodation as well as emergency bookings relating to flight delays. Doubletree Hilton Salt Lake City may see some occupancy uplift through airline contracts in FY20F as the new Salt Lake City airport nears completion. The Phase 1 of the new airport will open in Sep 20 with Phase 2 scheduled for 2024, A study by Expedia Group showed that, on average, travellers with Gen Alpha children take more than three family trips annually—most being domestic trips (68%). Most families place a high value in entertainment and happiness placing activities such as theme parks and attractions, water activities, and high outdoor activities within top consideration factors. Budget is also a primary factor for the majority (79%) of these family trips. Several of EHT’s assets tick both these consideration criteria within the domestic leisure segment of travellers.

Figure 12: Guests profile equally diversified across leisure and corporate travellers, while remaining well-shielded

from international travellers

Source: Eagle Hospitality Trust, KGI Research



Figure 13: EHT’s portfolio capitalize on three primary demand drivers – Corporate, Leisure & Airports (% of total

rooms in portfolio)


Rental upside from refurbishment and rebranding initiatives.

Eagle’s portfolio hotels are mostly between the ages of 35 to 40 years, with the youngest asset, The Westin Sacramento, completed in 2008. Significant capex of US$174mn was spent on primarily full refurbishments and major renovation works since 2013. This represents 14% of total portfolio valuation at listing date, with the vast majority (c. 59%) of asset enhancements completed in 2018, and another 25% completed in 1Q19.

Figure 14: Capex spent on EHT’s portfolio assets since 2013


Corporate (47.5%) Leisure (39.5%) Airports (13.0%)

Renaissance Denver Stapleton (7.4%) and

Holiday Inn Denver East – Stapleton (5.5%)

• Immediate proximity to the Colorado

Science and Technology Park and other

offices

• Renaissance Denver Stapleton is one of six

hotels with IACC2 certification in Colorado

Holiday Inn Resort Orlando Suites –

Waterpark (14.3%)

• Close proximity to Disney World

• 1 of 4 waterparks in the area – guests pay

an additional fee to use the waterpark

Doubletree by Hilton Salt Lake City Airport

(5.3%)

• 1.5 miles from Salt Lake City International

Airport (hub for Delta Airlines)

• New US$3.6bn airport under construction

(Phase 1 expected to complete in 2020;

Phase II in 2024)

Crowne Plaza Dallas Near Galleria-Addison

(7.9%)

• Proximity to major office complexes

• Proximity to Galleria shopping and Addison

centre

The Queen Mary Long Beach (6.4%)

• An iconic ship that is a destination in itself

• Events attract approximately 1.5 million

visitors per year

Holiday Inn Hotel & Suites San Mateo

(4.0%)

• 4.5 miles from San Francisco International

Airport

• Passenger traffic has increased 20 million

p.a. between 2007 and 2017

• Recently signed new airline contract

Renaissance Woodbridge (5.8%)

• Proximity to Rutgers University,

pharmaceutical company offices and other

corporates

• Corporate accounts include major tech

and accounting firms

Holiday Inn & Suites Anaheim (4.7%)

• Next to Disneyland • 1.3 miles from

Anaheim Convention Centre (largest on the

west coast)

Four Points by Sheraton San Jose Airport

(3.6%)

• 1.1 miles from Norman Y. Mineta San Jose

International Airport

• Airport is expected to undergo a billion-

dollar expansion over the next few years

• Recently signed multiple airline contracts

Sheraton Pasadena (5.7%)

• In Old Town Pasadena, with strong retail,

dining and entertainment within walking

distance

• Proximity to office complexes located in

Glendale

• Next to Civic Auditorium and convention

facilities

Others

• Crowne Plaza Danbury (4.5%)

• Embassy Suites by Hilton Anaheim North

(4.1%)

• Embassy Suites by Hilton Palm Desert

(3.7%)

• The Westin Sacramento (1.9%)

Others

• Hilton Houston Galleria Area (5.4%)

• Hilton Atlanta Northeast (5.0%)

• Sheraton Denver Tech Center (4.9%)

16.8

1.8

9.3

5.6 6.3 2.7 9.0

23.5

16.8

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Bulk of the capital expenditure was spent on the following 4 assets:

Holiday Inn Orlando Suites – Waterpark: a US$27.5 million full-scale renovation from early 2015 to Aug 2018 to rebrand the hotel from a Nickelodeon-branded hotel to a Holiday Inn brand franchise; reduced impact of seasonality by broadening the customer base from having predominantly family and leisure segments to include group, tour and business travel segments

The Queen Mary Long Beach: Sponsor collectively negotiated (with two other ground leases) with the City of Long Beach to include the adjacent land and water along the port of Long Beach; ensured early capital expenditure contributions of US$23.5 million from the City of Long Beach, to reopen and repurpose unutilised public and revenue-generating spaces, including restaurants and event venues, as well as perform structural works on the ship

Sheraton Pasadena: a US$15.6 million full renovation of all guestrooms, meeting space, public spaces and the restaurant from May 2017 to Sep 2018; Renovation of exterior front porch was more recently completed in May 2019

Renaissance Denver Stapleton: a US$16.8 million refurbishment programme between May 2017 and Sep 2018 comprising of all guestrooms, meeting space, the hotel lobby and restaurants were fully renovated; this enabled the hotel to secure a new airline contract (urban commons master lessee).

Figure 15: Capital expenditure by property and completion date (US$ mn)


We see lower operational disruptions in our forecast period as most major works had been completed by May 2019. Management expects the growth in RevPAR for Forecast Period 2019 to be mainly driven by organic market growth, higher average daily room rates which will see flow through after enhancement initiatives, and contracts entered into with corporate clients and government agencies. EHT’s portfolio average daily room rate is expected to increase from US$141.83 in FY19F to US$148.84 in FY20F, while average RevPAR is expected to increase from US$113.71 to US$116.93. EHT’s portfolio had generally performed well in comparison with the overall occupancy rates within the lodging market which hovered between 65.4% and 66.1% from 2016 – 2018.



Management expects a sharp pick up in occupancy from FY18 (74.7%) to FY19F (79.1%) following the completion of major renovation works in FY18.

Figure 16: Historical and forecasted changes in operating statistics


Figure 17: Historical and forward RevPAR expected for ASAP6 assets


Figure 18: Historical and forward RevPAR expected for USHI assets


Further AEI initiatives had been scheduled for an additional 6 assets with majority starting in FY19F, amounting to US$12.6mn. Future AEI had been shortlisted for the following 6 assets spread between 2019 and 2022. To ensure minimal operational disruption, the managers will be planning to commence renovations during periods of lower occupancy, which is usually in the last quarter of each calendar year.

Figure 19: Further asset enhancements post-listing


73.2% 70.9% 74.7% 79.1% 77.7%

$127.92 $131.72 $133.11

$141.83 $148.84

$94.58 $94.06 $100.56

$113.71 $116.93

66.0%

68.0%

70.0%

72.0%

74.0%

76.0%

78.0%

80.0%

$60

$80

$100

$120

$140

$160

FY16 FY17 FY18 FY19 FY20Ave Occupancy (%) - RHS Ave ADR (US$) - LHS Ave RevPAR (US$) - LHS

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FY16 FY17 FY18 FY19 FY20

Sheraton Denver TechCenter

Crowne Plaza DallasNear Galleria Addison

Hilton Houston GalleriaArea

Renaissance Woodbridge

Doubletree by HiltonSalt Lake City Airport

Hilton Atlanta Northeast

40

60

80

100

120

140

160

180


Sheraton Pasadena

Holiday Inn Hotel & SuitesAnaheim

Embassy Suites by HiltonAnaheim North

Holiday Inn Hotel & Suites SanMateo

Four Points by Sheraton SanJose Airport

The Westin Sacramento

Embassy Suites by Hilton PalmDesert

The Queen Mary Long Beach

Renaissance Denver Stapleton

Holiday Inn Denver East -Stapleton

Holiday Inn Orlando Suites -Waterpark

Crowne Plaza Danbury

Property Asset enhancement summary

Estimated amount

outstanding post

listing (US$mn)

Estimated

start date

Estimated

completion

date

Crowne Plaza Dallas Near Galleria-

Addison

Full renovation of rooms and public

spaces4.5 2021 2022

Holiday Inn Hotel & Suites San

Mateo

Renovation of public spaces including

restaurant, lounge and lobby area3.4 2019 2020

Sheraton Denver Tech Center Soft goods renovation 2.5 2019 2021

Hilton Houston Galleria AreaRenovation for rebranding into a

Doubletree by Hilton1.5 2019 2019

Doubletree by Hilton Salt Lake City

AirportRenovation of rooms and public spaces 0.5 2019 2019

Holiday Inn Resort Orlando Suites -

WaterparkRenovation of one restaurant 0.2 2019 2019



Benchmark inclusion within the GPR/APREA Index may lift trading liquidity Eagle Hospitality announced the inclusion within the GPR/APREA Composite Index and the GPR/APREA Composite REIT Index on 5 Sep 2019. The GPR/APREA Composite Index is a free float weighted index based on shares of the leading Asia Pacific property companies and the GPR/APREA Composite REIT Index considers REITs subsector of the broader GPR/APREA Index. The benchmark inclusion will take effect at the start of trading on 23 Sep 2019 and allow the REIT greater visibility amongst global and institutional investors. This may further lift trading liquidity for EHT, which had seen an average daily trading volume (historical 6 months) of S$2.0mn, on par with sector average (hospitality S-REITs). The inclusion criteria includes minimum levels of market capitalization, free float, trading volume, amongst other factors. The GPR/APREA Composite Index has 421 constituents, representing a free float market capitalisation of US$711 billion. The GPR/APREA Composite REIT Index has 164 constituents, representing a free float market capitalisation of US$305 billion.



Valuation

We derive a target price of 84 US cts based on a dividend discount valuation. Our target price represents an upside of 25.9%, inclusive of a forward FY19FF dividend yield forecasted at 10.3% (annualised).

Revenues: In line with management’s forecast, we expect total revenue to grow from US$77.6mn in FY19FF to US$88.4mn in FY20F. Fixed rent will make up 75% and 66% of our total room rental revenue forecast. Non-rental income associated with EHT’s service and amenities segment is expected to remain at 8% of total rental income. This assumption remains conservative due to the likelihood of an increase in patronage at Queen Mary Ship in association to an increase number of events and concerts, as well as an upgrading of restaurants prior to 3M19 that would likely translate to more revenue. On the flip side, several additional AEI works will involve renovations within the F&B spaces and public areas that may pose as an operational risk to the affected restaurants.

Operating Statistics: Occupancy, average daily rate and RevPAR are all expected to increase in FY19F following the completion of major and minor enhancement works from FY18 to 3M19. Occupancy is expected to increase from 74.7% in FY18 to 79.1% in FY19F and subsequently stabilise at 77.7% in the following year. Focus would be to increase average daily rate to drive rental income growth as ADR is anticipated to increase from US$133.11 in FY18 to US$141.83/US$148.84 in FY19FF/FY20F.

Income available for distribution: Factoring in a fair value change amounting to US$164mn in FY19F in line with management’s forecast, our income available for distribution at year end is US$37.3mn and US$57.6mn for FY20F.

DPU: We derived a DPU of 4.3 US cts/ 6.5 US cts for FY19F/FY20F based on the forecasted distribution yield of 8.2% and 8.4% at listing date. This translates to FY19FF and FY20F dividend yield of 10.3% (annualised) and 9.6% based on yesterday’s closing price of 67.5 US cts. Cost of Equity: We used a cost of equity rate of 9.3% and a conservative terminal growth rate of 1.5%.

Figure 20: Dividend Discount Model

Source: KGI Research, *FY19F Forward dividend yield annualised; FY19F DPU of 4.2US cts prorated since listing date 23 May 2019.

USD cents, YE 31 December FY18 FY19F FY20F FY21F FY22F FY23F FY24F FY25F FY26F

DPU - 4.2 6.5 6.7 6.9 7.0 7.2 7.4 7.5

YoY (%) 2.5% 2.5% 2.5% 2.5% 2.5%

Terminal Growth Rate (%) 1.5%

Terminal value per unit 96.1

Cost of Equity 9.30%

Target Price (US$) 0.84

Capital Appreciation 15.6%

Forward Dividend* 10.3%

Upside/(Downside) 25.9%



Peer Comparison We compare EHT to (i) other S-REITs with a pure focus on hospitality assets (ii) S-REITs with US-based underlying assets and (iii) US-listed hospitality REITs. EHT continues to trade at a discount to other hospitality S-REIT from a price to book perspective. Its current 0.8x P/B ratio is a decent discount compared to industry average of 1.0x, while offering a forward FY20F dividend yield (Bloomberg consensus: 9.8%) that is at a 340bps premium over industry average (6.4%). Amongst the Singapore listed US REITs, EHT continues to lag behind ARA US Hospitality Trust, its single most comparable peer. Since the listing of both EHT and ARA US Hospitality Trust on the Singapore Stock Exchange in May 19, EHT’s performance remained underwater (YTD: -13.5%) compared to the flattish share price performance of ARA US Hospitality Trust (YTD: 0%). From a dividend yield perspective (FY20F), EHT is also trading at a 160 bps premium despite greater rent income stability. A comparison to Manulife US REIT and Keppel Pacific Oak may not be a good indicator as they are within the office sector, which tend to trade at a premium over hospitality peers. US-listed hospitality peers may not be an accurate comparison. This peer group trades at an average FY19F P/B of 2.1x, while offering c.6.0% dividend yield after the lacklustre share price performance in the past 12 months. Historically, US-listed REITs tend to retain earnings to be used for capital deployment in asset acquisitions, and thus offer comparatively lower dividend yields. Another issue in mind would potentially be the withholding tax should local investors directly invest in US-listed REITs.

Figure 21: Local and global peer comparable

Source, KGI Research

Current FY19F FY20F Current FY19F FY20F

EAGLE HOSPITALITY TRUST USD 0.68 586 - 8.7 9.8 0.8 0.7 0.8 2,043 - -13.5

SINGAPORE LISTED HOSPITALITY REITS 1,117 7.0 5.9 6.4 1.0 1.0 1.0 2,002.9

ASCOTT RESIDENCE TRUST SGD 1.32 2,080 6.6 5.5 5.6 1.0 1.1 1.1 5,129 22.2 20.0

CDL HOSPITALITY TRUSTS SGD 1.64 1,438 6.3 - 5.8 1.1 - 1.1 3,213 12.3 2.5

FRASERS HOSPITALITY TRUST SGD 0.72 980 6.8 6.3 6.4 1.0 0.9 0.9 771 2.1 1.4

OUE HOSPITALITY TRUST SGD 0.73 971 7.4 6.8 7.0 1.0 1.0 1.0 855 9.7 1.4

FAR EAST HOSPITALITY TRUST SGD 0.69 960 6.6 5.8 6.1 0.8 0.8 0.8 1,583 14.0 8.7

ASCENDAS HOSPITALITY TRUST SGD 1.08 889 7.7 5.4 5.4 1.1 - - 1,988 40.3 32.9

ARA US HOSPITALITY TRUST USD 0.88 498 7.7 5.3 8.2 - 1.0 1.0 482 - 0.0

Average 1,117 7.0 5.9 6.4 1.0 1.0 1.0 2,003 16.8 9.6

Median 971 6.8 5.6 6.1 1.0 1.0 1.0 1,583 13.2 2.5

SINGAPORE LISTED US REITS 819 7.2 6.7 7.7 1.0 1.0 1.0 949.1

MANULIFE US REAL ESTATE INV USD 0.89 1,321 7.2 6.8 7.0 1.1 1.1 1.1 1,531 15.4 11.7

KEPPEL PACIFIC OAK US REIT USD 0.78 639 - 7.9 8.0 1.0 1.0 1.0 835 27.0 3.8

ARA US HOSPITALITY TRUST 0.88 498 - 5.3 8.2 - 1.0 1.0 482 - 0.0

Average 819 7.2 6.7 7.7 1.0 1.0 1.0 949 21.2 5.2

Median 639 7.2 6.8 8.0 1.0 1.0 1.0 835 21.2 3.8

US LISTED SELECT-SERVICE HOSPITALITY REITS 2,066 7.6 6.4 6.9 1.2 0.9 1.2 13,367.7

APPLE HOSPITALITY REIT INC USD 16.45 3,683 8.4 5.3 7.3 1.1 - - 19,049 15.4 -5.9

RLJ LODGING TRUST USD 16.99 2,925 8.0 7.8 7.8 1.0 0.9 0.9 21,673 3.6 -22.9

CHESAPEAKE LODGING TRUST USD 27.17 1,651 6.6 - 5.9 1.6 - 1.6 14,653 11.6 -15.3

SUMMIT HOTEL PROPERTIES INC USD 11.61 1,221 7.4 6.2 6.2 1.3 1.0 1.1 7,218 19.3 -14.2

CHATHAM LODGING TRUST USD 18.17 853 7.7 - 7.3 1.1 - - 4,246 2.8 -13.0

Average 2,066 7.6 6.4 6.9 1.2 0.9 1.2 13,368 10.5 -14.3

Median 1,651 7.7 6.2 7.3 1.1 0.9 1.1 14,653 11.6 -14.2

US LISTED FULL-SERVICE HOSPITALITY REITS 3,951 7.2 5.9 5.9 2.1 2.5 2.5 30,731.8

HOST HOTELS & RESORTS INC USD 17.11 12,489 5.1 5.0 5.0 1.7 1.8 1.8 121,408 2.6 -18.9

MGM GROWTH PROPERTIES LLC-A USD 30.01 8,641 6.6 6.4 6.0 1.4 2.1 1.9 24,082 13.6 1.8

PARK HOTELS & RESORTS INC USD 24.88 5,966 10.5 7.6 7.7 0.9 0.9 0.9 62,348 -4.2 -24.2

RYMAN HOSPITALITY PROPERTIES USD 81.86 4,211 5.1 - 4.5 9.7 10.2 11.0 22,477 22.7 -5.0

PEBBLEBROOK HOTEL TRUST USD 27.46 3,587 5.4 5.5 5.6 1.1 - - 30,019 -3.0 -24.5

SUNSTONE HOTEL INVESTORS INC USD 13.66 3,072 5.3 3.6 4.8 1.2 1.1 1.2 26,616 5.0 -16.5

XENIA HOTELS & RESORTS INC USD 21.11 2,378 6.4 5.6 5.5 1.3 - 1.5 19,893 22.7 -10.9

DIAMONDROCK HOSPITALITY CO USD 10.28 2,058 5.5 4.9 4.9 1.1 1.1 1.2 22,101 13.2 -11.9

HERSHA HOSPITALITY TRUST USD 14.77 580 6.4 7.6 7.6 1.2 0.4 0.6 5,253 -15.8 -34.8

ASHFORD HOSPITALITY TRUST USD 3.46 353 12.0 7.0 6.9 - - - 3,341 -13.5 -45.9

CONDOR HOSPITALITY TRUST INC USD 11.03 131 11.3 - - 1.4 - - 512 60.1 3.2

Average 3,951 7.2 5.9 5.9 2.1 2.5 2.5 30,732 9.4 -17.1

Median 3,072 6.4 5.6 5.5 1.3 1.1 1.3 22,477 5.0 -16.5

Last Price

(local $)Company Name

Currency Adj.

Market Cap

(US$ m)

6M Average daily

trading volume

(S$ '000)

P/B (x)Dividend Yield (%)YTD Price

Performance

(%)

1YR Price

Performance

(%)



Key Risks Finalisation of US tax regulation (Section 267A) anticipated at year end. Concerns on DPU cuts originating from the US tax regulation, Section 267A, caused some of EHT’s local listed peers to suffer a 12% - 28% share price decline in October 2018. The final interpretation of this same tax ruling is scheduled to take place end of the year. One of the biggest cause of concern would the impact of the new tax ruling on EHT’s tax structure. We note that both of the US hospitality S-REITs do not share the same tax structure as their local US office peers, which have a longer track record. This remains an overhanging risk until the maiden distribution is made to unitholders. Foreign exchange risk. Forward USDSGD exchange rates will likely remain fairly stable in the next one year. Forward 6 months and 1 year USDSGD pairing will increase to 1.39 and 1.38 respectively according to analyst consensus on Bloomberg. This represents an appreciation of the USD against the local currency of 14 bps and subsequent depreciation of 58 bps. We do not expect forex risk to be material in the coming one year forecast period. Greater than expected capex requirements. Notwithstanding that all assets had undergone some form of enhancement from 2013 worth c. US$174mn, higher than expected capex requirements could be warranted given the higher than forecasted occupancy rates going forward into FY19F and FY20F. Declining RevPAR and occupancy numbers in line with macro-forecasts. Both STR and Tourism Economics recently downgraded their RevPAR for the US hospitality sector. Occupancy is expected to fall 30 bps to 66.1% in 2020, with both ADR and RevPAR expected to increase at rates below inflationary levels. ADR is forecasted to rise 1.4% to US$133.70 and RevPAR to increase 1.1% to US$88.40. This is in part due to new room inventory surpassing steady demand growth, especially within the select-service segment. The dip in occupancy would mark the first YoY decline since 2009.

Impact of seasonality. According to the Independent Market Research Consultant, the RevPAR in the U.S. typically declines during the colder winter months, especially in December when the holidays result in a decline in business-related transient and group travel. Corporate travel demand tends take a dip in December due to national holidays on Thanksgiving and Christmas, where the festive celebrations are usually held back at home. Rising labour expenses. The US recently recorded the highest annual wage increase in more than 10 years, supported by a near 50 year low unemployment figure of 3.7% reported end of last year. Among private industry subsectors, compensation cost increased an average of 2.8% over the past one year period, ending in Jun 19. The employee cost index for the service sector rose 2.8% across the same time period, with the leisure and hospitality subsector recording one of the highest increment in salary at 4.16%. Rising labour expenses pose as a greater risk for full-service assets such as EHT’s portfolio as compared to hotels within the economic and select-service segments. Gun violence in the US. Latest news on gun violence may deter the international tourist arrivals to the U.S. New warnings cautioning international travellers from visiting the U.S. have been released following mass shootings that took place in El Paso, Texas and Dayton, Ohio in early Aug 19. Countries that have issued new travel advisories against the U.S. include Uruguay, Venezuela, and Japan. Human rights campaign group Amnesty International has also issued a worldwide warning for all potential visitors to the U.S.



Sensitivity Analysis: US Recession Impact We conducted a sensitivity analysis to anticipate the impact of changes in occupancy rates and average daily room (ADR) rate on EHT’s forecasted revenue in FY20F and our 12 month target price on the REIT. EHT’s anticipates weighted occupancy to dip from 80% in FY19F to 78.1% in FY20F, while average daily room rates to increase from a simple average of US$141.83 to US$148.8mn respectively. Our sensitivity analysis shows that a 6% increase in both FY20F’s forecasted occupancy rate and ADR would translate to a 10.9% hike in FY20F’s revenue attributable to EHT unit holders, and concurrently lift our 12 month target price to 96 US cts. Our worst case scenario anticipates a 6% dip in both FY20F’s forecasted occupancy rate and ADR and would result in FY20F’s revenue sliding 8.6% to US$79.4m, with our 12 month target price at 72 US cts. EHT’s master lease structure shelters total revenue attributable to the REIT in times of demand weakness, while allowing unit holders to enjoy the rental upside if EHT’s assets outperform.

Figure 22: Impact on FY20F’s total revenue following changes in forecasted

occupancy rates (horizontal input) and forecasted average daily room rate

(vertical input)


Figure 23: Impact on our 12 month target price following changes in

forecasted occupancy rates (horizontal input) and forecasted average daily

room rate (vertical input)


Figure 24: Forecasted operating statistics following a -6% change in both

FY20F’s occupancy rates and average daily room rate

Source: KGI Research

Figure 25: Forecasted operating statistics following a +6% change in both

FY20F’s occupancy rates and average daily room rate


88.4 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

-6.0% 79.4 80.8 82.3 83.7 85.2 86.7 88.1

-4.0% 80.8 82.3 83.8 85.3 86.8 88.3 89.8

-2.0% 82.3 83.8 85.3 86.9 88.4 89.9 91.4

0.0% 83.7 85.3 86.9 88.4 90.0 91.5 93.1

2.0% 85.2 86.8 88.4 90.0 91.6 93.1 94.7

4.0% 86.7 88.3 89.9 91.5 93.1 94.8 96.4

6.0% 88.1 89.8 91.4 93.1 94.7 96.4 98.0

0.84 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

-6.0% 0.72 0.74 0.76 0.78 0.79 0.81 0.83

-4.0% 0.74 0.76 0.78 0.80 0.81 0.83 0.85

-2.0% 0.76 0.78 0.80 0.82 0.84 0.85 0.87

0.0% 0.78 0.80 0.82 0.84 0.86 0.88 0.90

2.0% 0.79 0.81 0.84 0.86 0.88 0.90 0.92

4.0% 0.81 0.83 0.85 0.88 0.90 0.92 0.94

6.0% 0.83 0.85 0.87 0.90 0.92 0.94 0.96

194

314

103 79 58

120

211

21

Roomrevenue

Non-roomRevenue

Total assetrevenue

(GOR)

Operatingexpenses

Grossoperating

profit(GOP)

Revattributable

to EHT

Fixedrevenue

Variablerevenue

246

399

131 98

58

153

268

40

Roomrevenue

Non-roomRevenue

Total assetrevenue

(GOR)

Operatingexpenses

Grossoperating

profit(GOP)

Revattributable

to EHT

Fixedrevenue

Variablerevenue



Company Overview US Hospitality REIT with a focus on full-service hotels. Eagle Hospitality Trust is a US-based hospitality REIT listed on the Singapore Stock Exchange with a primary focus on full-service hotels. The REIT manager seeks to capture value and sustainable shareholder returns via a three-pronged approach: (1) Proactive asset management and asset enhancement strategy (2) Investments and acquisition growth strategy (3) Capital management strategy Property Portfolio. EHT’s initial IPO portfolio consist of 18 full-service hotel properties located across 8 US states. The portfolio was valued at approximately US$1.27bn, with a total room count of 5,240. Each hotel primarily relies on three key revenue drivers – corporate demand, leisure demand, and airport demand. The initial IPO portfolio was created from the amalgamation of two separate portfolios – the USHI portfolio and the ASAP6 portfolio. The USHI portfolio consist of 12 assets that were directly managed by EHT’s sponsor, Urban Commons, and equally held by the founders of Urban Commons – Howard Wu and Taylor Woods. The ASAP6 Portfolio was acquired from a third party prior to the listing date and comprise of the remaining 6 assets. As a characteristic of full-service hotel assets, EHT derives revenue from services and amenities. Room revenue makes up two-third of EHT’s revenue stream, with the remaining revenue streams being F&B revenue, carpark revenue and events revenue. We understand that bulk of non-room revenue can be traced back to event revenue from Queen Mary Ship and ticketing revenue from the Lagoon Waterpark within Holiday Inn Resort Orlando Suites. Majority (93.6%) of hotel assets are branded by the top 3 global hotel franchisors by number of room keys – IHG (41%), Marriott (29%) and Hilton (24%). These brands share a total of 302 million loyalty members worldwide. EHT can tap on existing loyalty programmes attached to these global hotel franchisors to attract hotel visitors, apart from online travel agencies which usually charge a commission premium. All assets are leased under a master lease agreement with a fixed base and a variable component that is pegged to gross operating revenue and gross operating profit. According to management’s forecast, fixed rent will represent 66% of EHT’s total rent in FY20F. This allows stability and visibility of future rental income stream, while allowing unitholders to gain from the variable component should the assets outperform expectations. Each master lease agreement is set at an initial term of 20 years, with an option to extend for another 14 years (Californian assets) and 20 years (assets located out of California). A third party hotel management

company is responsible for day-to-day operations of all assets held by EHT with 2% of annual revenue as remuneration.

Figure 26: EHT owns 18 portfolio and 5,240 hotel rooms located across 8

US states

Source: Company, KGI Research

Figure 27: Initial geographical exposure by room count


Figure 28: Room revenue made up c. two-thirds of EHT’s total revenue in

the last reported quarter (2Q19)


Figure 29: Market segment breakdown of EHT’s portfolio by room count




Capital Management. All of EHT’s loans are denominated in USD, lowering operational forex risk. The vast majority (93%) of borrowings are on a fixed rate basis, with an average debt maturity of 4.2 years. EHT recently entered into an interest rate swap in 1 July 2019 to mitigate interest rate on c.75% of borrowings, resulting in cost savings of c.US$1.36mn per annum. The cost savings in interest rate will like flow through to the income statement in the coming quarter (3Q19). We note that EHT’s all-in cost of debt (3.9%) reported in the most recent quarter was c.220 bps above the 10-year risk free rate and may pose as a catalyst should EHT be able to refinance before maturity at a lower rate. At the current leverage ratio of 38.0%, EHT has a debt headroom of c. US$170mn pegged to the current regulatory gearing limit of 45%. The sponsor – Urban Commons The Sponsor of EHT is Urban Commons, LLC, a privately-held real estate investment and development firm based in Los Angeles. Urban Commons was co-founded by Howard Wu and Taylor Woods in 2008, who are the Chairman and Deputy Chairman of the Managers respectively. The Sponsor also currently manages and/or owns numerous properties under various stages of entitlement and development, spanning hospitality, multifamily, retail and assisted living, valued in excess of US$800 million upon completion.

Figure 33: Pipeline assets – Wagner at the Battery (New York)


Figure 34: Pipeline assets – Ramada Hialeah (Miami)


Figure 30: Debt maturity profile as at end 2Q19


Figure 31: EHT’s Trust Structure


Figure 32: Sponsor, Urban Common’s milestones and track record




Company Snapshot

Figure 35: Company profile

Listed on the Mainboard of the Singapore Exchange since 23 May 2019, Eagle

Hospitality Trust (EHT) is a REIT with a focus on full-service hospitality real

estates located in the United States. With a portfolio valuation of US$1.27bn,

EHT’s portfolio consists of 18 assets, spread over 5,420 room keys, located

across 8 US states.

EHT is backed by Urban Commons, a privately-held real estate investment

and development firm based in Los Angeles with a 10-year track in hotel

acquisitions and asset management.

Source: Company

Figure 37: Revenue breakdown (in US$, millions) vs NPI margin (%)

Source: Company Data, KGI Research

Figure 39: Interesting coverage (x) and gearing (%)


Figure 41: Historical P/B ratio since listing (23 May 2019) (x)


Figure 36: Initial geographical exposure by room count and last reported

revenue by segment (2Q19)

Source: Company

Figure 38: DPU (US cents) and Dividend yield (%)


Figure 40: Price/NAV (x)


Figure 42: Share price performance as compared to benchmarks


51.1

81.3 81.9

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EAGLEHT SP EQUITY Ave P/B Ratio (x)

+ve 1 S.D. -ve 1 S.D.

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17.7%14.3%

13.3%

5.8%

4.5%

5.3%5.0%

California

Colorado

Florida

Texas

New Jersey

Connecticut

Utah

Georgia

67.0%

18.9%

8.1%

5.9%

Rooms Revenue F&B Revenue

Other Revenue Misccellaneous

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9.8% 9.9%

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DPU (LHS), US cts Dividend yield (RHS)

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EAGLEHT SP EQUITY STI Index FSTREI Index



Financial forecasts

Figure 43: Forecasted Financials (IPO listing date – 2021F)


INCOME STATEMENT (USD mn) At IPO Listing 2019F 2020F 2021FGross revenue 63.1 95.4 96.4Property expenses (12.1) (14.1) (14.5)Net property income 51.1 81.3 81.9REIT Manager's fees (3.7) (5.8) (7.5)REIT Trustee's fees (0.2) (23.1) (19.2)Net interest expense (15.0) (22.4) (18.7)Other expenses (1.9) 20.9 17.1Net profit/(loss) 30.3 50.9 53.7Change in fair value - investment ppty 164.0 0.0 0.0Total return before tax 194.3 50.9 53.7Income tax (34.7) (0.4) 0.0Total return after tax 159.5 50.6 53.7Distributable income 37.2 57.6 58.3

BALANCE SHEET (USD mn) At IPO Listing 2019F 2020F 2021FCash and cash equivalents 60.8 27.3 73.0 113.7Trade and other receivables 2.4 2.4 3.6 3.6Other current assets 0.0 0.0 0.0 0.0Total current assets 63.2 29.7 76.6 117.3Investment properties 1,274.6 1,438.6 1,438.6 1,438.6Intangibles, others 0.0 0.0 0.0 0.0Total assets 1,337.7 1,468.3 1,515.2 1,555.8Trade and other payables 3.9 3.9 4.6 4.7Other current liabilities 0.0 0.0 0.0 0.0Total current liabilities 3.9 3.9 4.6 4.7LT Borrowings 500.4 500.4 500.4 500.4Other non-current liabilities 68.2 68.2 68.2 68.2Total liabilities 568.7 568.7 568.7 568.7Unitholders' funds and reserves 769.1 899.6 946.5 987.2Total liabilities and equity 1,337.7 1,468.3 1,515.2 1,555.8

CASH FLOW STATEMENT (USD mn) At IPO Listing 2019F 2020F 2021FTotal return before tax 194.3 50.9 53.7Depreciation & Amortisation 0.0 0.0 0.0Other non-cash adjustments (129.9) 51.3 45.4Changes in working capital 0.0 0.6 (0.1)Taxes paid 0.0 0.0 0.0Cash flows from operations 64.4 102.8 99.0Capital expenditure (23.6) 0.0 0.0Acquisition of investment properties (1,111.6) 0.0 0.0Other investing cashflow 0.0 0.0 0.0Cash flows from investing (1,135.2) 0.0 0.0Borrowings raised / (repaid) 0.0 0.0 0.0Equity raised / (bought back) 1,184.5 0.0 0.0Dividends paid (37.1) (57.1) (58.3)Other financing cashflow (49.2) 0.0 0.0Cash flows from financing 1,098.2 (57.1) (58.3)FX Effects, Others 0.0 0.0 0.0Net increase in cash 27.3 45.7 40.6Beginning Cash 0.0 27.3 73.0Ending cash 27.3 73.0 113.7

KEY RATIOS At IPO Listing 2019F 2020F 2021FDPU (USD cents) 0.0 4.2 6.5 6.7Dividend yield % 0.0 6.1 9.3 9.6NAV per share (USD cents) 87.7 102.6 107.9 112.6Price/NAV (x) 0.0 0.7 0.6 0.6

Profitability (%)NPI Margin 0.0 64.0 64.0 64.0Net Margin 0.0 252.8 53.0 55.7ROE 0.0 17.8 5.4 5.5ROA 0.0 10.9 3.3 3.4

Financial Structure Interest Coverage (x) 0.0 4.1 4.3 4.9Gearing (%) 37.4 34.1 33.0 32.2

A



Appendix: Key Management

Key Management Background

Salvatore G. TAKOUSHIAN

Executive Director and Chief

Executive Officer

Mr Salvatore Takoushian is the Executive Director and Chief Executive Officer and President of the Managers.

Together with Howard Wu and Taylor Woods, Mr Takoushian was integral to the founding and establishment of the

Managers and Eagle Hospitality Trust (“Eagle HT”). As the key person spearheading the listing and strategic direction of

Eagle HT, Mr Takoushian was responsible for assembling the management team and was actively involved in the

establishment of the debt syndicate and the equity syndicate for the IPO of Eagle HT. Mr Takoushian has over 16 years of

experience in investment banking with extensive experience advising lodging and real estate companies in strategic and

financial matters. During his career, he has managed the execution of public and private capital raises in excess of US$25

billion, including significant U.S. REIT IPO experience, and more than US$20 billion of merger and acquisition transactions.

His experience encompasses mergers and acquisitions, joint ventures, asset/portfolio divestitures and he has led many

financing transactions including debt and equity. Prior to joining the Managers, he was Managing Director at Jefferies, LLC

from 2015 to 2018 and headed the company’s global lodging investment banking business with a focus on public REITs,

global private equity sponsors and private real estate and lodging companies. While at Jefferies, Mr Takoushian also played

a role in advising the Founders in relation to part of the Initial Portfolio. From 2004 to 2015, he was with Citigroup Global

Markets Inc. where his last held position was Director, Investment Banking and where he maintained similar responsibilities.

Mr Takoushian holds a Bachelor of Science in Business Administration with concentrations in Finance and Accounting from

Boston University where he graduated Magna Cum Laude.

John Bovian JENKINS Jr

Chief Operating Officer

Mr John Jenkins is the Chief Operating Officer of the REIT Manager.

Mr Jenkins has over 35 years of experience in the hospitality sector in the U.S. Prior to joining the REIT Manager, he was Vice

President, Asset Management and Operations with Urban Commons, LLC since 2016, and was responsible for overseeing the

day-to-day operations of the hotels in the USHI1 Portfolio. From 2012 to 2016, he was with Evolution Hospitality working at

The Queen Mary Long Beach as Hotel Manager before being promoted to General Manager. From 2007 to 2011, he was Vice

President and Hotel Manager with Gaylord National Resort and Convention Center where managed the operations of the

hotel and convention centre. From 1983 to 2007, he has held numerous positions in operations, sales and marketing, and

revenue management at various Marriott hotels across the U.S., including Resident Manager at New York Marriott Marquis,

General Manager at Trenton Marriott in New Jersey and Assistant General Manager at Marriott at Metro Center in

Washington D.C.. From 2010, Mr Jenkins also started and ran his own hospitality consultancy under Sydjul Hospitality, LLC,

and his clients included The Peterson Companies, the developer of the National Harbor, Maryland. Sydjul Hospitality LLC is

expected to be dormant and Mr Jenkins will not be actively marketing and growing the business of Sydjul Hospitality LLC

while he is a full-time employee of the Managers.

Fred CHEE

Chief Financial Officer

As Chief Financial Officer of the Managers, Fred will be managing the financial and regulatory reporting, compliance, risk

management, investor relations and corporate affairs of the Managers. His principal responsibility will be to work together

with management to develop and implement prudent capital management as well as key business strategies of the

Managers to ensure sound risk management and governance.

Before joining the Managers, Fred was Chief Financial Officer of Sasseur Asset Management Pte. Ltd. , the manager of

Sasseur REIT, a real estate investment trust listed on the Main Board of the Singapore Exchange Securities Trading Limited.

Fred has 30 years of experience in the banking, real estate and property fund management industry. He began his career in

audit at PriceWaterhouse in 1989. After his stint in the audit sector, he moved into the banking industry in BNP Paribas

where he last served in the Global Financial Markets financial control team in 1999.

From 1999 to 2006, Fred was with Ascendas Pte Ltd as the Head of Corporate Finance and Taxation, handling the financing

and reporting. He was also involved in the structuring and setting up of private funds and property trusts. From 2006 to

2009, he was Chief Financial Officer South East Asia of Limitless LLC, an Integrated International Real Estate Development

company and a business unit of Dubai World, a investment company wholly-owned by the Government of Dubai. As Chief

Financial Officer, he led his company to establish its Singapore office and was involved in handling the acquisitions of key

investments in Malaysia, Indonesia and Vietnam.

In 2009, he took on the role of Finance Director of ARA Managers (Asia Dragon) Pte Ltd, a private real estate fund with total

assets under management of US$3.0 billion of assets primarily in the main cities of China, Singapore, Hong Kong and

Malaysia.

In 2013, he joined Sunway Group as Chief Financial Officer in China, overseeing finance, administrative and reporting

functions operations of the international and China Group businesses. Additionally, he also led the financial feasibilities

studies, deal due diligence, M&A structuring and finance.

Fred holds a Bachelor of Accountancy and a Master of Applied Economics from the National University of Singapore and is a

Chartered Accountant of Singapore.



Appendix: Portfolio operating statistics

Figure 44: Revenue forecast breakdown by fixed and variable rent

Source: KGI Securities, IPO Prospectus



Figure 45: EHT portfolio operating statistics (USHI portfolio)

Source: KGI Research, IPO Prospectus

Properties Sheraton Pasadena Holiday Inn Hotel

& Suites Anaheim

Embassy Suites

by Hilton Anaheim

North

Holiday Inn Hotel

& Suites San Mateo

Four Points by

Sheraton San Jose

Airport

The Westin

Sacramento

Embassy Suites by

Hilton Palm Desert

The Queen Mary

Long Beach

Renaissance

Denver Stapleton

Holiday Inn Denver

East - Stapleton

Holiday Inn

Orlando Suites -

Waterpark

Crowne Plaza

Danbury

Acronym SPH HIA ESAN HISM FPSJ WSAC ESPD QUEEN RDH HIDH OHIR CPD

Location California California California San Francisco San Jose Sacramento Palm Desert Long Beach Colorado Colorado Florida Connecticut

Property Type 3 Star Hotel 3 Star Hotel 3 Star Hotel 3 Star Hotel 3 Star Hotel 4 Star Hotel 4 Star Hotel 3 Star Hotel 4 Star Hotel 3 Star Hotel 3 Star Hotel 4 Star Hotel

Completion Date 1975 1978 1987 1991 1986 2008 1984 1936 1985 1973 1999 1980

Last Refurbishment May-19 Apr-17 Nov-18 Jun-18 Mar-16 Dec-15 Feb-18 Dec-18 Sep-18 Sep-18 Aug-18 Dec-18

Land Tenure Freehold Freehold Freehold Freehold Freehold Freehold Freehold 66 years from Nov 2016 Freehold Freehold Freehold Freehold

Number of rooms 311 255 223 219 195 101 198 347 400 298 777 242

Lease TenureMaster Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 14 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Lease type

Fixed (4.2mn) +

Variable (22%

GOR+24% GOP - FR)

Fixed (3mn) +

Variable (26%

GOR+25% GOP - FR)

Fixed (2.1mn) +

Variable (20%

GOR+17% GOP - FR)

Fixed (3.3mn) +

Variable (28%

GOR+29% GOP - FR)

Fixed (2.8mn) +

Variable (24%

GOR+24% GOP - FR)

Fixed (1.6mn) +

Variable (23%

GOR+22% GOP - FR)

Fixed (1.4mn) +

Variable (18%

GOR+17% GOP - FR)

Fixed (10.4mn) +

Variable (8% of

GOP)

Fixed (3.9mn) +

Variable (17%

GOR+24% GOP - FR)

Fixed (2.3mn) +

Variable (20%

GOR+22% GOP - FR)

Fixed (7.5mn) +

Variable (19%

GOR+22% GOP - FR)

Fixed (0.8mn) +

Variable (10%

GOR+10% GOP - FR)

Deposit Reserve 4% room rev 4% room rev 4% room rev 4% room rev 4% room rev 4% room rev 4% room rev2% rev in FY19, 3%

rev in FY20 onwards4% room rev 4% room rev 4% room rev 4% room rev

Market Segment Upper Upscale Upper Midscale Upper Upscale Upper Midscale Upscale Upper Upscale Upper Midscale Upscale Upper Upscale Upper Midscale Upper Midscale Upscale

Demand drivers Corporate Leisure Leisure Airport Airport Leisure Leisure Leisure Corporate Corporate Leisure Leisure

<----------------- USHI Portfolio ----------------->



Figure 46: EHT portfolio operating statistics (ASAP6 portfolio)

Source: KGI Research, IPO Prospectus

Properties Sheraton Denver

Tech Center

Crowne Plaza

Dallas Near Galleria

Addison

Hilton Houston

Galleria Area

Renaissance

Woodbridge

Doubletree by

Hilton Salt Lake City

Airport

Hilton Atlanta

Northeast

Acronym SDTC CPDL HHG RW SLC HAN

Location Colorado Texas Houston New Jersey Utah Georgia

Property Type 3 Star Hotel 4 Star Hotel 3 Star Hotel 4 Star Hotel 4 Star Hotel 3 Star Hotel

Completion Date 1985 1984 1978 1986 1980 1986

Last Refurbishment Dec-13 Mar-19 May-19 May-19 May-19 Dec-18

Land Tenure Freehold Freehold Freehold Freehold Freehold Freehold

Number of rooms 263 428 292 312 288 271

Lease TenureMaster Lease

20 + 20 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Master Lease

20 + 20 years

Lease type

Fixed (1.8mn) +

Variable (16%

GOR+18% GOP - FR)

Fixed (2.5mn) +

Variable (18%

GOR+20% GOP - FR)

Fixed (2.2mn) +

Variable (22%

GOR+20% GOP - FR)

Fixed (3.4mn) +

Variable (19%

GOR+19% GOP - FR)

Fixed (2.6mn) +

Variable (21%

GOR+22% GOP - FR)

Fixed (2.4mn) +

Variable (19%

GOR+20% GOP - FR)

Deposit Reserve 4% room rev 4% room rev 4% room rev 5% room rev 4% room rev 4% room rev

Market Segment Upper Upscale Upscale Upper Upscale Upper Upscale Upscale Upper Upscale

Demand drivers Corporate Corporate Corporate Corporate Airport Corporate

<----------------- ASAP6 Portfolio ----------------->



KGI’s Ratings Rating Definition Outperform (OP) We take a positive view on the stock. The stock is expected to outperform the expected total

return of the KGI coverage universe in the related market over a 12-month investment horizon. Neutral (N) We take a neutral view on the stock. The stock is expected to perform in line with the expected

total return of the KGI coverage universe in the related market over a 12-month investment horizon.

Underperform (U)

We take a negative view on the stock. The stock is expected to underperform the expected total return of the KGI coverage universe in the related market over a 12-month investment horizon

Not Rated (NR) The stock is not rated by KGI Securities. Restricted (R) KGI policy and/or applicable law regulations preclude certain types of communications,

including an investment recommendation, during the course of KGI's engagement in an investment banking transaction and in certain other circumstances.

Disclaimer This report is provided for information only and is not an offer or a solicitation to deal in securities or to enter into any legal relations, nor an advice or a recommendation with respect to such securities. This report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any recipient hereof. You should independently evaluate particular investments and consult an independent financial adviser before dealing in any securities mentioned in this report. This report is confidential. This report may not be published, circulated, reproduced or distributed and/or redistributed in whole or in part by any recipient of this report to any other person without the prior written consent of KGI Securities. This report is not intended for distribution and/or redistribution, publication to or use by any person in any jurisdiction outside Singapore or any other jurisdiction as KGI Securities may determine in its absolute discretion, where the distribution, publication or use of this report would be contrary to applicable law or would subject KGI Securities and its connected persons (as defined in the Financial Advisers Act, Chapter 110 of Singapore) to any registration, licensing or other requirements within such jurisdiction. The information or views in the report (“Information”) has been obtained or derived from sources believed by KGI Securities to be reliable. However, KGI Securities makes no representation as to the accuracy or completeness of such sources or the Information and KGI Securities accepts no liability whatsoever for any loss or damage arising from the use of or reliance on the Information. KGI Securities and its connected persons may have issued other reports expressing views different from the Information and all views expressed in all reports of KGI Securities and its connected persons are subject to change without notice. KGI Securities reserves the right to act upon or use the Information at any time, including before its publication herein. Except as otherwise indicated below, (1) KGI Securities, its connected persons and its officers, employees and representatives may, to the extent permitted by law, transact with, perform or provide broking, underwriting, corporate finance-related or other services for or solicit business from, the subject corporation(s) referred to in this report; (2) KGI Securities, its connected persons and its officers, employees and representatives may also, to the extent permitted by law, transact with, perform or provide broking or other services for or solicit business from, other persons in respect of dealings in the securities referred to in this report or other investments related thereto; and (3) the officers, employees and representatives of KGI Securities may also serve on the board of directors or in trustee positions with the subject corporation(s) referred to in this report. (All of the foregoing is hereafter referred to as the “Subject Business”.) However, as of the date of this report, neither KGI Securities nor its representative(s) who produced this report (each a “research analyst”), has any proprietary position or material interest in, and KGI Securities does not make any market in, the securities which are recommended in this report. Each research analyst of KGI Securities who produced this report hereby certifies that (1) the views expressed in this report accurately reflect his/her personal views about all of the subject corporation(s) and securities in this report; (2) the report was produced independently by him/her; (3) he/she does not carry out, whether for himself/herself or on behalf of KGI Securities or any other person, any of the Subject Business involving any of the subject corporation(s) or securities referred to in this report; and (4) he/she has not received and will not receive any compensation that is directly or indirectly related or linked to the recommendations or views expressed in this report or to any sales, trading, dealing or corporate finance advisory services or transaction in respect of the securities in this report. However, the compensation received by each such research analyst is based upon various factors, including KGI Securities’ total revenues, a portion of which are generated from KGI Securities’ business of dealing in securities. Copyright 2019. KGI Securities (Singapore) Pte. Ltd. All rights reserved.

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