Far East Hospitality Trust - CGS-CIMB Research 2018-10-30: Stronger RevPAR Boosted 9M Performance


Far East Hospitality Trust - Stronger RevPAR Boosted 9M Performance

  • Far East Hospitality Trust’s (FEHT) 9MFY18 DPU (+2.4% y-o-y) came in broadly in line with expectations, at 73% of our and consensus full-year forecasts.
  • Stronger y-o-y revenue and DPU was mainly driven by the acquisition of Oasia Downtown and more robust performance from hotels.
  • We have an ADD call on FEHT and a target price of S$0.69.

9MFY18 results broadly in line with expectations

  • Far East Hospitality Trust’s (FEHT) 9MFY18 DPU of 3 cents (+2.4%) came in at 73% of our and consensus full-year forecasts of 4.1 cents.
  • Gross revenue for 9MFY18 was S$84.8m, an increase of 8.5% y-o-y, due mainly to the addition of Oasia Hotel Downtown to the portfolio (acquisition completed in April 2018) as well as stronger revenue per available room (RevPAR).
  • In tandem with the stronger gross revenue, net property income (NPI) increased by 9.1%. However, net income before fair value revaluation increased by a slower rate of 5.2% due to a jump in finance cost (+26.7% y-o-y) to S$18.7m as a result of additional loan drawn down to fund the acquisition of Oasia Hotel Downtown and higher short-term interest rates.

Hotel reported improvement in RevPAR

  • RevPAR of the hotel portfolio grew 5.8% to S$145m in 9MFY18 due to an increase of 1.8% pts to 90.1% in average occupancy and by 3.7% to S$161 in the average daily rate (ADR).
  • Serviced residences’ revenue per available unit (RevPAU) declined 1.2% y-o-y to S$176. Average occupancy of serviced residences improved 3.4% pts to 84% but ADR fell 5.2% to S$210.
  • The commercial segment’s revenue in 9MFY18 was S$16.7m versus S$17.1m in the previous year.

Balance sheet position relatively unchanged

  • FEHT had a total of S$1,026.4m debt outstanding as at Sep 2018, of which 54.3% was fixed loans.
  • The gearing level was 40.4% versus 40.3% in 2QFY18 while the average cost of debt was 2.6% versus 2.5% in 2QFY18.

Maintain ADD

  • We retain our ADD call and DDM-based target price of S$8.88.
  • We expect hotel RevPAR to continue to trend upwards due to the lower supply and encouraging tourist arrivals. Its higher average occupancy rate and lower ADR as compared to its peers provide it more room for improvement.
  • However, the better performance from the hotel segment in 8888 will be partially offset by the weaker serviced residence segment, which accounted for 88.8% of the total revenue in 8MFY88.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2018-10-30
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