Far East Hospitality Trust - CGS-CIMB Research 2020-02-14: Bracing For The Impact Of Covid-19 Outbreak


Far East Hospitality Trust - Bracing For The Impact Of Covid-19 Outbreak

  • Far East Hospitality Trust's FY19 DPU of 3.81 Scts (-4.8% y-o-y) was in line with our forecast.
  • Hotel RevPAR down 1.3% y-o-y partially offset by +2.7% RevPAU from SR.
  • Maintain HOLD as Far East Hospitality Trust braces for the impact from the Covid-19 outbreak.

FY19 DPU of 3.81Scts in line with our forecast

  • Far East Hospitality Trust (SGX:Q5T)’s FY19 DPU of 3.81Scts (-4.8% y-o-y) was in line at 98% of our full-year forecast of 3.89Scts. Although full-year revenue and NPI improved 1.6% y-o-y and 1.5% y-o-y to S$113.7m and S$104.3m respectively, net income before tax and fair value changes declined 3.5% to S$61.3m, mainly due to higher interest expense on higher borrowings.
  • The stronger full-year revenue was mainly driven by the better 9MFY19 results, as 4Q was flat y-o-y.
  • FY19 DPU declined at a larger magnitude of 4.8% due to the enlarged share base with the dividend reinvestment plan.

FY19 hotel RevPAR down 1.3% y-o-y

  • Full-year FY19 hotel revenue increased 1.9% y-o-y to S$80m, driven by the acquisition of Oasia Downtown completed in Apr 2018. Full-year RevPAR however declined 1.3% y-o-y to S$144 on lower ADR (-1.3% y-o-y) due to lower contribution from the corporate segment and higher composition of the leisure segment.
  • The 1H19 was weaker than the 2H19 as the hotel portfolio did not have the benefit in the first-half year of demand brought about by major biennial and one-off city-wide events in Singapore as compared to 1H18 while stronger leisure demand contributed to a better 2H19.
  • Far East Hospitality Trust’s FY19 RevPAR growth was slightly below when compared to the industry’s 11M2019 RevPAR growth of +1.9%.

Serviced residence continued to deliver positive RevPAU

  • Far East Hospitality Trust’s serviced residence (SR) segment did better than its hotel segment with RevPAU growing by 2.7% y-o-y to S$177. While occupancy declined 0.6% pts y-o-y to 84%, average daily rate improved 3.4% to S$210 due to continued growth in shorter-stay bookings at higher room rates.
  • Having said that, longer stay bookings ( > 1 month) still accounted for more than 75% of total bookings. Its serviced residence has been reporting positive y-o-y RevPAU growth since 2Q2019.

Maintain HOLD at a DDM-based Target Price of S$0.65

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-14
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.65 UP 0.640