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Thursday, March 25, 2021

Far East Hospitality Trust Review @ 25 March 2021

Basic Profile & Key Statistics

Far East Hospitality Trust (FEHT) is a stapled group that owns 13 properties in Singapore. Some of the properties have space for retail and office.

Performance Review

Gross revenue, NPI, income available for distribution and DPU decreased YoY by 34.8%, 38%, 29.5% and 30.7% respectively. The decrease is mainly due to a decline in master lease rental for hospitality properties and rental rebates given to commercial (retail and office) tenants. Around 19.3% of the distribution is from the retention in 1H FY2020. 

Lease Profile

  • WALE is long at 10.02 years
  • Highest lease expiry within 5 years is low at 8.5% which falls in this year.
  • Weighted average land lease expiry is moderate at 62.33 years


Debt Profile

  • Gearing ratio is slightly high at 40.9%
  • Cost of debt is low at 2.4%
  • Fixed rate debt % is low at 60.3%
  • All debts are unsecured debts
  • WADM is short at 2.3 years 
  • Highest debt maturity within 5 years is low at 24.1% which falls in this year
  • Interest coverage ratio is low at 2.4 times


Diversification Profile

  • All properties are located in Singapore
  • Top property contribution is slightly low at 18.6%
  • Top 5 properties contribution is low at 55.4%
  • Top tenant contribution is high at 14.7% 
  • Top 10 tenants contribution is high at 76.5% 

Key Financial Metrics

  • Property yield is low at 2.7%
  • Management fees over distribution is high at 19.8% in which unitholders receive S$ 5.05 for every dollar paid 
  • Distribution on capital is low at 1.8%
  • Distribution margin is high at 57.2% 

Trends

  • Downtrend - DPU, NAV per Unit, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin


Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 2.41 cents / average yield @ 6.14% = S$ 0.395
  • Price/NAV - NAV @ S$ 0.79 x average P/NAV @ 0.72 = S$ 0.57


Author's Opinion

 Favorable Less Favorable
Diversified FactorShort WADM
Long WALELow Interest Coverage Ratio
No Major Lease Expiry within 5 Years100% Top Geographical Contribution
Low Cost of DebtHigh Top Tenant & Top 10 Tenants Contribution
100% Unsecured DebtLow Property Yield
Well Spread Debt MaturityNon Competitive Management Fees
Low Top 5 Properties ContributionLow Distribution on Capital
 Low Distribution Margin
 DPU Downtrend
 NAV per Unit Downtrend
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

In view of COVID-19 vaccination started over the world, potential travel bubbles arrangement between Singapore and other countries as well as the easing of restriction from 5 Apr, the Singapore hospitality sector performance is expected to pick up. FEHT also continues to benefit from its master leases which the high fixed rent accounted for 77% of FY 2020 gross revenue.


On 23 March, FEHT announced that it received outline advice from URA regarding the redevelopment of Central Square (Village Residence Clarke Quay). There is no conclusion from the manager at this moment, one of the possible options would be divestment.


For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT-TIREMENT Patreon - Support this blog as a Patron and get SREITs Dashboard PDF or SREITs Data Excel

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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