Far East Hospitality Trust (FEHT) reported its first results since listing (for the financial period 1 Aug-31 Dec 2012) that were generally in line with our expectations. While gross revenue, at S$42.2m, was 0.7% lower than the pro-rated forecast in the prospectus, net property income of S$38.8m was 0.2% higher than the forecast as a result of lower operating expenses. Active management of finance costs and other trust expenses helped to lift its income available for distribution 4.5% above its forecast to S$33.6m. We update our assumptions for Oasia’s future RevPAR to levels closer in line with its peer hotels, and raise our fair value from S$1.02 to S$1.05. However, we maintain our HOLD rating on FEHT on valuation grounds.
First results since IPO
Far East Hospitality Trust (FEHT) reported its first results since listing (for the financial period 1 Aug 2012-31 Dec 2012) that were generally in line with our expectations. While gross revenue, at S$42.2m, was 0.7% lower than the pro-rated forecast in the prospectus, net property income of S$38.8m was 0.2% higher than the forecast as a result of lower operating expenses. Active management of finance costs and other trust expenses helped to lift its income available for distribution 4.5% above its forecast to S$33.6m.
Weak serviced residence revenue
Gross revenue from hotels was 0.6% higher than forecast at S$33.9m; stronger rental income from commercial spaces and an increase in the meetings and banquet business (e.g. at Changi Village) helped to make up for RevPAR of S$171 being 1.7% lower than forecast. Gross revenue from serviced residences (SRs) was 5.7% less than forecast at S$8.3m due to corporate cutbacks in 2H12. Corporate accounts that were lost during the previous AEI were not satisfactorily replaced. The SRs are trying to diversify away from banking/financials sector clients and are looking more at other services and oil and gas. Valuation of the portfolio increased by 0.9% to S$2.16b.
Mid-tier hotels fairing better
Among FEHT’s properties, the upscale hotels such as Quincy are facing more pressure than the mid-tier hotels. An industry contact explained that 4-star hotels are being squeezed by 5-star hotels, which have been lowering rates. We understand that if FEHT buys the Rendezvous Hotel (298 rooms) from Straits Trading, the purchase is likely to take place around end 2Q13. Negotiations and due diligence are still ongoing and there is no assurance that the transaction will proceed.
Maintain HOLD
We update our assumptions for Oasia’s future RevPAR to levels closer in line with its peer hotels, and raise our fair value from S$1.02 to S$1.05. However, we maintain our HOLD rating on FEHT on valuation grounds.
Far East Hospitality Trust (FEHT) reported its first results since listing (for the financial period 1 Aug 2012-31 Dec 2012) that were generally in line with our expectations. While gross revenue, at S$42.2m, was 0.7% lower than the pro-rated forecast in the prospectus, net property income of S$38.8m was 0.2% higher than the forecast as a result of lower operating expenses. Active management of finance costs and other trust expenses helped to lift its income available for distribution 4.5% above its forecast to S$33.6m.
Weak serviced residence revenue
Gross revenue from hotels was 0.6% higher than forecast at S$33.9m; stronger rental income from commercial spaces and an increase in the meetings and banquet business (e.g. at Changi Village) helped to make up for RevPAR of S$171 being 1.7% lower than forecast. Gross revenue from serviced residences (SRs) was 5.7% less than forecast at S$8.3m due to corporate cutbacks in 2H12. Corporate accounts that were lost during the previous AEI were not satisfactorily replaced. The SRs are trying to diversify away from banking/financials sector clients and are looking more at other services and oil and gas. Valuation of the portfolio increased by 0.9% to S$2.16b.
Mid-tier hotels fairing better
Among FEHT’s properties, the upscale hotels such as Quincy are facing more pressure than the mid-tier hotels. An industry contact explained that 4-star hotels are being squeezed by 5-star hotels, which have been lowering rates. We understand that if FEHT buys the Rendezvous Hotel (298 rooms) from Straits Trading, the purchase is likely to take place around end 2Q13. Negotiations and due diligence are still ongoing and there is no assurance that the transaction will proceed.
Maintain HOLD
We update our assumptions for Oasia’s future RevPAR to levels closer in line with its peer hotels, and raise our fair value from S$1.02 to S$1.05. However, we maintain our HOLD rating on FEHT on valuation grounds.
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