OCBC Investment Research initiated coverage of Global Premium Hotels Ltd with a 'buy' rating and a target price of S$0.29, citing a strong track record and positive outlook for Singapore's hotel sector.
Global Premium shares were up 4.1 percent at S$0.255 and have fallen about 10.5 percent since it began trading in April, compared with a 2.3 percent decline in the FTSE ST Consumer Services Index over the same period.
Global Premium is the second largest operator of economy-tier hotels in Singapore, with over 23 hotels and 1,738 rooms in total, OCBC said.
It also noted that the company is developing a hotel under the "Parc Sovereign" brand, which would increase the total number of rooms it owns by 15 percent and could potentially lead to a fair value gain of S$42 million.
The company will also benefit from the continued growth in Singapore's hotel sector. Demand for hotel rooms is expected to grow at 6.4 percent a year from 2012 to 2014, which is still higher than an expected hotel supply growth of 4.8 percent a year on average over the same period, OCBC said.
Reporting by Charmian Kok in Singapore; email@example.com