FAR EAST HOSPITALITY TRUST (SGX:Q5T)
Far East Hospitality Trust - Downside Protection From Fixed Rent
- Far East Hospitality Trust's 2H20/FY20 DPU fell 30.7%/36.7% y-o-y.
- FY20 RevPAR fell and RevPAU fell 50.0%/12.6% y-o-y.
- S$5.3m of retained distributable income was released.
Far East Hospitality Trust's FY20 results meet expectations
- Far East Hospitality Trust (SGX:Q5T)’s 2H20 gross revenue and NPI dropped 34.8% and 38.0% y-o-y to S$39.0m and S$33.6m respectively, mainly due to lower master lease rental income and rental rebates given to commercial tenants.
- Far East Hospitality Trust released S$5.3m of retained distributable income in 1H20 on stabilised operating environment. As such, 2H20 DPU dropped 30.7% y-o-y to 1.38 cents while FY20 DPU fell 36.7% y-o-y to 2.41 cents and formed 102% of full-year forecast, in line with our expectations.
Hotels on fixed rent while SRs performed above fixed rent
- In terms of RevPAR performance, Far East Hospitality Trust's 2H/FY20 hotels RevPAR fell 56.5%/50.0% y-o-y to S$64/S$71.
- Separately, 2H/FY20 SRs RevPAU declined 19.0%/12.6% y-o-y to S$153/S$159. The decline in RevPAR/PAU was mainly due to a decline in ADRs as occupancy rate continued to be supported by government contracts and corporate bookings. However, occupancy rate for hotels and SRs fell q-o-q in 4Q20 as corporates sourced for alternative, cheaper accommodations for their workers.
- Overall, SRs continued to perform better than hotels and above fixed rent.
Buffer from fixed rent component (~77% of gross revenue in FY20)
- Six out of Far East Hospitality Trust’s nine hotels are currently on government isolation businesses with existing contracts expiring in mid-March (~100% occupancy, but at cheaper ADRs). Management expects that government could still need some inventory of rooms due to imported cases.
- With the global rollout of vaccines and Singapore’s target to inoculate its entire population by 3Q21, we expect the demand from the isolation business to taper off in 2021 but Far East Hospitality Trust’s fixed rent component which formed about 77% of gross revenue in FY20 could continue to provide some buffer and downside protection.
- After adjustments, our fair value estimate remains at 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.
Chu Peng
OCBC Investment Research
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https://www.iocbc.com/
2021-02-15
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