-->

Far East Hospitality Trust - Maybank Kim Eng 2021-05-03: A Slow Start

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

Far East Hospitality Trust - A Slow Start


Far East Hospitality Trust reported Soft 1Q21 numbers

  • Far East Hospitality Trust (SGX:Q5T)’s 1Q21 revenue and NPI fell 6.9% y-o-y and 8.4% y-o-y respectively due to lower RevPAR and RevPAU for its Singapore hotels and serviced residences (SRs) portfolio. Its operations remain cushioned by isolation demand, likely to be extended into 3Q21.
  • Far East Hospitality Trust remains our preferred play into a (slow) sector recovery, with the high proportion of minimum fixed rent from its master lease offering downside support amid soft RevPAR growth in 2021.
  • Our DPU forecasts for Far East Hospitality Trust are unchanged. Its valuation is undemanding at 0.8x P/B, and it offers 15% upside to our S$0.70 DDM-based target price (COE: 5.4%, LTG: 2.0%).



Hotels revenue up q-o-q in 1Q21, still backed by fixed rent

  • Far East Hospitality Trust's hotel revenue was flat y-o-y but jumped 22% q-o-q to ~67% of revenue in 1Q21, supported by fixed rent from its master leases.
  • Occupancy fell from 85.1% in FY20 to 76.1% in 1Q21 due to lower demand for accommodation from companies housing their foreign workers, while RevPAR was weaker at S$51 (from S$71 for FY20) as a result of lower ADRs of S$66 (from S$84 in FY20), and staycation demand at the Sentosa Barracks easing off.
  • We see government contracts for isolation demand buoying occupancy, likely extended after mid-May 2021, with better RevPAR visibility in 2H21.


Serviced Residences revenue dipped, but supported by long-stays

  • Far East Hospitality Trust's serviced residences revenue fell by ~14% y-o-y and ~9% q-o-q, but it still performed above its fixed rent, with support from long-stay corporate demand, which was at 79.0% of revenue, led by the services trade and y-o-y growth in FMCG and Oil & Gas.
  • RevPAU fell 21% y-o-y to S$140 (from S$159 in FY20) due to lower occupancy (83.6% to 74.7%) and 12% y-o-y softer ADRs.
  • We expect a weaker 1H as gains from the growth earlier at higher rates ease off.

May prefer redevelopment instead of acquisitions






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-03
SGX Stock Analyst Report BUY MAINTAIN BUY 0.700 SAME 0.700



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......