Far East Hospitality Trust - Maybank Kim Eng 2020-02-14: Weaker DPU Visibility

FAR EAST HOSPITALITY TRUST (SGX:Q5T) | SGinvestors.io FAR EAST HOSPITALITY TRUST (SGX:Q5T)

Far East Hospitality Trust - Weaker DPU Visibility


RevPAR set to fall (again), downgrade to HOLD




Weaker-than-expected 4Q19, SRs did better

  • Revenue was flat y-o-y while NPI dipped 1.0% y-o-y, with stable occupancies at both its hotels and serviced residences (SRs). RevPAR for its hotels fell 0.6% y-o-y on weaker corporate demand for the quarter while RevPAU for its SRs rose 1.9% y-o-y with growth in shorter-stay bookings at higher ADRs.
  • Singapore’s initially busy 2020 event calendar has seen cancellations and postponements into 2H20, and near-term demand visibility remains weak. We factor in lower RevPAR at -12% (from +3-5%) with slower occupancies in 1H20.
  • Its master leases generated 72% of its FY19 rental income according to management; the REIT’s assets could trade down to their minimum rents if demand declines by 25-30% as suggested by Singapore’s Tourism Board (STB).


Easing supply, AEIs cushion RevPAR downside

  • Further RevPAR downside should be cushioned to some extent by easing supply. Savills estimates new hotel rooms to slow to 1.0-1.2% pa in 2020- 21, from +5.1% pa between 2013-17.
  • Far East Hospitality Trust has completed the AEI at Orchard Rendezvous after a rebranding effort and may bring forward AEIs at its older hotel assets (eg. Elizabeth Hotel) or redevelopment plans for the commercial properties within its portfolio, which aim to dovetail the government’s longer term CBD rejuvenation plans.


Shares have retreated, not yet value territory






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-02-14
SGX Stock Analyst Report HOLD DOWNGRADE BUY 0.70 DOWN 0.800



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