EHT listing should have been a no-no with SGX

OVER the past week, The Business Times has done some excellent reporting on Eagle Hospitality Trust (EHT). Listed just five months ago, it has already managed to destroy almost 40 per cent of shareholder value. The catalyst has been the controversy around the Hotel Queen Mary, but the real issue is simply the quality of the Reit.

Two major red flags in the IPO prospectus show that it should never have been allowed to list.

Valuations: Six out of 18 hotels (or a third of EHT's portfolio) lack any valuation numbers, so investors are essentially buying these assets blindfolded. (see amendment note) Based on their 2018 net property income (NPI) of US$45 million, the remaining 12 hotels are valued at a high capitalisation rate of 4.9 per cent (US$910 million valuation). Similar-quality US hotels trade at cap rates of 8 to 8.5 per cent.