Far East Hospitality Trust - OCBC Investment 2020-03-16: Sentiment Turning More Cautious

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

Far East Hospitality Trust - Sentiment Turning More Cautious

  • COVID-19 spread intensified.
  • Serviced residences and commercial portfolio could provide a buffer.
  • Lower Fair Value estimate of S$0.52.



COVID-19 was declared a pandemic

  • COVID-19 is spreading rapidly across the globe. As of 13 Mar, COVID-19 has spread to over 120 countries with more than 140,000 reported cases. More countries announced travel bans on visitors from coronavirus hotspots and advised people to defer all non-essential travel overseas. At a media briefing, WHO declared COVID-19 a pandemic and called all countries to take comprehensive measures to combat the virus.


Larger impact on hotels than on SRs

  • From our channel checks, the hotel industry’s occupancy rate in Singapore has dropped to ~30% in MTD March vs. February’s occupancy rate of ~40%. We understand that Far East Hospitality Trust (SGX:Q5T)’s performance was slightly better than the industry average with higher hotel occupancy rate of mid-30s for MTD March and ~50% in Feb.
  • Serviced residences (SRs) performed better than hotels due to its long term nature of stays and focus on corporate travel. Occupancy rate of SRs was ~80% for Feb vs. ~70% in MTD March.
  • In terms of forward bookings, April’s bookings was ~13% y-o-y lower while May’s booking was flat as compared to the same period last year. Far East Hospitality Trust is seeing more “last minute bookings” with bookings coming in 1 or 2 weeks in advance as travellers are taking a wait-and-see approach. However, with the uncertainty ahead, we could potentially see more cancellations should the situation further escalate e.g. wide community outbreak in Singapore and stricter travel restrictions.



Higher risk of gross revenue declining to its minimum rent






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2020-03-16
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.52 DOWN 0.650



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