FAR EAST HOSPITALITY TRUST (SGX:Q5T)
Far East Hospitality Trust - Pure Play Status A Double-Edged Sword
- Recent travel ban on inbound travellers from China to curb coronavirus spread in Singapore.
- Hotel operating environment facing near term uncertainty.
- Anticipate downside to RevPAR in the near term to cap share price performance.
- Downgrade to HOLD, Target Price cut to S$0.69.
Downgrade to HOLD.
- We downgrade our recommendation on Far East Hospitality Trust (SGX:Q5T) to HOLD.
- Cautious sentiment shrouding hoteliers in Singapore as a result of the coronavirus outbreak is likely to affect Far East Hospitality Trust’s DPU performance this year. In view of Far East Hospitality Trust’s exposure to the Singapore market only and c.70% exposure to hotels by gross revenue (balance: c.12% serviced residences and c.18% commercial), we believe Far East Hospitality Trust’s operations would be adversely impacted.
Where we differ – more conservative estimates with downside risk to room rates.
- Our forecast is below consensus as we have only projected 3% recovery in RevPAR in 2020-2021 but we see downside risk in the near term as travellers stay away in the near term.
- Approximately c.58% of rent revenues fixed, hence downside shielded. Approximately 58% of income from the hotel and serviced residence components are fixed within a master lease structure. The remaining c.19% and c.23% are derived from commercial premises with longer lease tenures and variable rents from hotels and service residences.
- While the master lease structure incorporates elements of stability, variable rents from hotels and service residences may be shaved off, which will hit FY20F DPU.
Valuation:
- Our Target Price is reduced to S$0.69 is pegged to 0.85x P/NAV in line with its historical mean.
- See Far East Hospitality Trust Share Price; Far East Hospitality Trust Target Price; Far East Hospitality Trust Analyst Reports; Far East Hospitality Trust Dividend History; Far East Hospitality Trust Announcements; Far East Hospitality Trust Latest News.
- See also report:
Derek TAN
DBS Group Research
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Singapore Research Team
DBS Research
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https://www.dbsvickers.com/
2020-02-03
SGX Stock
Analyst Report
0.690
DOWN
0.80
