FAR EAST HOSPITALITY TRUST (SGX:Q5T)
Far East Hospitality Trust - Take A Break
- Strong performance since upgrade…
- But expect RevPAR softness for 1Q19 results.
- 5.9% FY19F yield as at 12 Apr close.
Weak SG RevPAR data points for 1Q19
- According to channel checks as well as Singapore Tourism Board (STB) data, we are likely looking at a soft 1Q19 for SG hotels.
- STB data reflected poor RevPAR performance from Upscale and Mid-tier hotels for the first two months of the year:
- Upscale hotels posted -3.8% and -6.5% y-o-y RevPAR growth for Jan and Feb respectively, while
- Mid-tier hotels posted 1.0% and -4.3% y-o-y RevPAR growth.
- Our channel checks have revealed that March was also a subdued month for the industry.
- Given that the supply situation remains favourable, we believe the softness in RevPAR has more to do with the absence of events that were held last year (e.g. the biennial Singapore Airshow).
Medium-term outlook should still be intact
- Given that FAR EAST HOSPITALITY TRUST (SGX:Q5T)’s portfolio of hotels and serviced residences are wholly located in Singapore, and operate largely in the mid-tier to upscale segments, we believe that these STB figures are relevant references for the operational performance of the REIT. That said, beyond 1Q19, we continue to see a two-year runway for RevPARs to improve given the benign supply outlook.
Total returns of 14.2% since our upgrade
- Since our 13 Aug 2018 upgrade report (see report: Far East Hospitality Trust - Too Far South From Our Fair Value) till 12 Apr’s close, Far East Hospitality Trust has posted total returns of 14.2% vs. the Straits Times Index’s (STI) 3.0% and the FTSE Straits Times REIT Index’s (FSTREI) 11.2%. As at 12 Apr’s close, we no longer find Far East Hospitality Trust’s unit price compelling as it is now above our unchanged fair value of S$0.68.
- Ascott Residence Trust, CDL Hospitality Trusts, and Far East Hospitality Trust are trading at FY19F yields of 5.9%, 5.7% and 5.9% respectively, based on our own forecasts. Using Bloomberg consensus figures, Far East Hospitality Trust’s blended forward 12m yield is at 6.25%, or ~1 standard deviation below its 5 year average.
- We downgrade Far East Hospitality Trust from a Buy to a HOLD.
Deborah Ong
OCBC Investment Research
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https://www.iocbc.com/
2019-04-15
SGX Stock
Analyst Report
0.680
SAME
0.680
