Far East Hospitality Trust - OCBC Investment 2015-11-04: Soft Results As Expected

Far East Hospitality Trust - OCBC Investment 2015-11-04: Soft Results As Expected FAR EAST HOSPITALITY TRUST Q5T.SI 

Far East Hospitality Trust (FEHT) - SOFT RESULTS AS EXPECTED 

  • 3Q15 DPU slipped 9.1% YoY 
  • RevPARs and RevPAUs both lower YoY 
  • No change to forecasts, rating and FV 

3Q15 results in-line with expectations 

  • Far East Hospitality Trust (FEHT) reported its 3Q15 results which met our expectations. 
  • Operational performance remained muted, with gross revenue falling 4.8% YoY to S$29.7m, as a 3.8% growth in its retail and office revenue to S$6.1m was unable to offset a 6.8% decline from its master lease rental to S$23.6m. 
  • DPU slipped 9.1% to 1.20 S cents, attributable largely to a lower topline and higher finance expenses. However, this was an encouraging improvement of 3.4% on a QoQ basis. 
  • For 9M15, FEHT’s gross revenue was lower by 6.2% at S$85.8m, and this formed 72.4% of our FY15 forecast. DPU of 3.43 S cents represented a dip of 11.1%, and constituted 73.8% of our full-year projection. 

Operational trends still reflect challenging outlook 

  • RevPAR and RevPAU for FEHT’s Hotels and Serviced Residences (SR) segments remained weak. This was underpinned by a challenging operating environment in light of sluggishness in corporate travel demand as well as softness in leisure travel due to a relatively strong SGD and haze situation. 
  • A positive came from stable occupancy rates for the quarter (Hotels: +0.3 ppt to 87.4%; SR: -2.0 ppt to 90.2%. However, as average daily rate (ADR) fell 6.0% to S$172 for its Hotels segment and 7.2% for its SR to S$232, this culminated in RevPAR and RevPAU declining by 5.6% and 9.2% YoY to S$151 and S$209, respectively. 
  • Performance for its SR was also impacted by ongoing refurbishment at Regency House and a slowdown in the Banking & Finance and Oil & Gas industries which resulted in less re-location and training to Singapore. 

Maintain HOLD 

  • Looking ahead, FEHT highlighted that industry conditions are expected to remain tough, given the subdued macroeconomic landscape and upcoming hotel supply. 
  • Nevertheless, management said that the month of October had been better-than-expected despite the haze situation. FEHT will continue its AEIs and will seek to improve its online presence and marketing efforts. 
  • Given this in-line set of results, we opt to retain our forecasts, HOLD rating and S$0.67 fair value estimate on FEHT.

Andy Wong Teck Ching CFA OCBC Securities | http://www.ocbcresearch.com/ 2015-11-04
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.67 Same 0.67