FAR EAST HOSPITALITY TRUST (SGX:Q5T)
Far East Hospitality Trust - Expecting A Muted 2Q
- Negative performance since downgrade.
- 6.1% FY19F yield as at 11 Jun’s close.
- Cheaper, but not yet compelling.
Underperformed the FSTREI by 8.8ppt since our 15 Apr downgrade
- FAR EAST HOSPITALITY TRUST (FEHT, SGX:Q5T) has posted total returns of –4.5% since our downgrade (see report: Far East Hospitality Trust - Take A Break) from Buy to HOLD on 15 Apr, vs. the FTSE Straits Times REITs Index’s total returns of +4.3% and the Straits Times Index’s total returns of - 2.0% in the same period.
Latest hospitality figures point to 2Q weakness
- Singapore Tourism Board’s (STB) Apr numbers reflect decent visitor growth but a generally disappointing RevPAR performance for the first month of the 2Q. Visitor arrivals were up +3.4% y-o-y in Apr, with visitor days up +4.0% y-o-y. Meanwhile, RevPAR for Mid-tier and Upscale hotels posted -1.6% and - 2.1% y-o-y growth in Apr respectively. This is broadly consistent with what was disclosed by CDL HOSPITALITY TRUSTS (SGX:J85) in their last results release: CDL Hospitality Trusts’s SG RevPAR was down 3.5% for the first 25 days of April.
- In our last report, we did highlight that April would continue to be challenging for Singapore hotels given the absence of biennial event Food&HotelAsia. See report: Far East Hospitality Trust - Challenging First Few Months. In addition, the Trump-Kim summit held in Jun last year was another boon for Far East Hospitality Trust’s hotels that will be absent this year.
- We continue to see 2H19 as being more promising for RevPARs than 1H19, but continue to keep an eye on the US-China trade tensions and its implications for discretionary spending across the region.
Underperformed STI by 4% since our 15 Apr downgrade
- Based on our own forecasts, Far East Hospitality Trust is trading at a FY19F yield of 6.1%, as at 11 Jun’s close. Using Bloomberg consensus figures, Far East Hospitality Trust’s blended forward 12m yield stands at 6.65% as at 11 Jun’s close, very close to its 5-year average. In contrast, ASCOTT RESIDENCE TRUST (SGX:A68U) and CDL Hospitality Trusts are trading at 1.8x and 1.1x standard deviations below their 5-year averages, respectively.
- While Far East Hospitality Trust’s unit price has come off with the counter trading at more reasonable valuations as compared to Ascott Residence Trust and CDL Hospitality Trusts, we believe muted outlook for 2Q18 and ongoing macroeconomic uncertainties will weigh on the stock.
- We maintain HOLD on Far East Hospitality Trust with an unchanged fair value of S$0.67.
Deborah Ong
OCBC Investment Research
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https://www.iocbc.com/
2019-06-12
SGX Stock
Analyst Report
0.670
SAME
0.670
