Far East Hospitality Trust - DBS Research 2016-04-27: Outlook still cloudy

Far East Hospitality Trust - DBS Research 2016-04-27: Outlook still cloudy FAR EAST HOSPITALITY TRUST Q5T.SI 

Far East Hospitality Trust - Outlook still cloudy 

  • 1Q16 DPU of 1.08 Scts up 1% y-o-y was in line with expectations 
  • Flat RevPAR for hotels but serviced residences still weak 
  • Positive initial signs but outlook still cloudy 

Limited re-rating catalysts. 

  • We maintain our HOLD call with TP of S$0.63. 
  • As a Singapore-focused REIT and with competitive pressures in the Singapore hospitality market that are expected to persist, we believe there is limited re-rating catalyst for Far East Hospitality Trust (FEHT) in the near term. 

Competitive pressures to persist. 

  • Despite the majority of new hotel supply in Singapore largely concentrated within the Singapore River precinct away from FEHT’s hotels, we believe the 6-7% increase in overall industry room inventory will still put pressure on FEHT’s operations. 
  • We have pencilled in a 4% y-o-y decline in RevPAR and combined with higher costs of debt, should translate into a 7% decline in FY16F DPU. 

Strong balance sheet. 

  • While we are cautious on FEHT’s near term earnings, there is significant upside to our forecast if FEHT deploys its strong balance sheet. 
  • FEHT’s gearing as at end-Dec-15 stood at approximately 32.7%. 


  • Fairly Valued. 
  • With FEHT trading close to our DCF-based TP of S$0.63, we maintain our HOLD call. 

Key Risks to Our View: 

  • Rebound in demand. Our cautious stance on FEHT is premised on a supply imbalance in the Singapore hospitality market. 
  • However, should we experience a significant rebound in demand absorbing the c.3,900 new rooms added in 2016, there will be upside risks to our DPU estimates and TP.

Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-04-27
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 0.63 Same 0.63