FAR EAST HOSPITALITY TRUST (SGX:Q5T)
Far East Hospitality Trust - Boost From Vaccine Hope
- Performance improved q-o-q
- Downside protection from fixed rent structure.
- Higher Fair Value estimate of S$0.66.
Positive vaccine development
- Far East Hospitality Trust's share price performance has been boosted by rapid vaccine development.
- Latest vaccine progress such as Pfizer and BioNTech’s announcement of resounding success in its final trial results, Moderna’s 94.5% effective vaccine and AstraZeneca and Oxford University’s potential COVID-19 vaccine etc was definitely good news for the hospitality sector. It was also reported that COVID-19 vaccines from Pfizer and Moderna could be ready for US authorisation and distribution within weeks. This could set the stage for vaccine inoculation to begin as early as Dec 2020 and could further grow the confidence and drive the recovery of Far East Hospitality Trust (SGX:Q5T).
Benefit from border reopening and easing travel restriction in Singapore
- As at 19 Nov’s close, Far East Hospitality Trust's share price is trading at 0.78x forward P/B which is slightly above its historical mean of 0.75x.
- As a pure-play hospitality REIT in Singapore, Far East Hospitality Trust’s recovery will largely depend on international tourists’ arrivals which we believe will in turn depend on the availability of COVID-19 vaccines.
- While near-term demand will likely be driven by staycation and government bookings, Far East Hospitality Trust will benefit as Singapore gradually reopens its borders amid low infection rates, easing travel restrictions and instruction of special travel arrangements.
- Far East Hospitality Trust’s fixed rent component which formed about 72% of the master lease rental in FY19, and its commercial segment i.e. office and retail (19% of FY19 gross revenue) could also provide some buffer and downside protection in the near-term.
Adjusting DPU forecasts for FY20-24F up by 1-3%
- Factoring in the development on vaccines, we increase our Far East Hospitality Trust's DPU forecasts for FY20-24F by 1-3% while decreasing our cost of equity assumption to 7.4% to account for the improved sentiment and outlook. Our fair value estimate for Far East Hospitality Trust hence increases from S$0.58 to S$0.66.
- 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.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-11-20
SGX Stock
Analyst Report
0.66
UP
0.580
