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REITs investment & personal finance


Tuesday, November 16, 2021

Far East Hospitality Trust Review @ 16 November 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 Highlight

Despite a similar gross revenue as compared to last year, income available for distribution increased YoY by 12.5% mainly due to improved NPI and lower finance expenses from lower fixed rates of new interest rate swap contract.

REVPAU for both hotels and serviced residences has decreased due to the decline in demand from companies that require temporary accommodation for their foreign workers.

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 52.484%
  • REIT manager's shareholding is high at 5.425%
  • Directors of REIT manager's shareholding is high at 0.166%

Lease Profile

  • WALE is long at 9.27 years
  • Highest lease expiry within 5 years is low at 7.7% which falls in this year
  • Weighted average land lease expiry is moderate at 61.58 years

Debt Profile

  • Gearing ratio is high at 41.6%
  • Cost of debt is low at 2%
  • Fixed rate debt % is low at 54.6%
  • All debts are unsecured debts
  • WADM is short at 2.2 years
  • Highest debt maturity within 5 years is low at 22.3% which falls in 2024
  • Interest coverage ratio is low at 2.7 times

Diversification Profile

  • All properties are located in Singapore
  • Top property contribution is moderate at 18.6% 
  • Top 5 properties contribution is low at 55.4% 
  • Top tenant contribution is high at 15% 
  • Top 10 tenants contribution is high at 78.4%

Key Financial Metrics

  • Property yield is low at 2.8% 
  • Management fees over distribution is high at 18.9% in which unitholders receive S$ 5.29 for every dollar paid 
  • Distribution on capital is low at 1.9%
  • Distribution margin is high at 60.7%
  • Include retention, management fees over distribution, distribution on capital and distribution margin is at 17.6% (high), 2.1% (low) and 65% (high) respectively.

Trends

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

Relative Valuation

  • P/NAV - Above +1SD for 1y; Above average for 3y and 5y
  • Dividend Yield - Below average for 1y; Below -1SD for 3y and 5y

Author's Opinion

 Favorable Less Favorable
Diversified SectorHigh Gearing Ratio
High REIT Sponsor's ShareholdingLow Fixed Rate Debt %
High REIT Manager's ShareholdingShort WADM
High Directors of REIT Manager's Shareholding Low Interest Coverage Ratio
Long WALEHigh Top Geographical Contribution
No Major Lease Expiry within 5 YearsHigh Top Tenant & Top 10 Tenants Contributions
Low Cost of DebtLow Property Yield
100% Unsecured DebtNon-Competitive Management Fees
Well Spread Debt MaturityLow Distribution on Capital
Low Top 5 Properties ContributionDPU Downtrend
High Distribution MarginNAV per Unit Downtrend
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

FEHT performance is supported by a high fixed rent rate as well as government contracts for isolation purposes and long-stay corporate contracts. With VTL open to more countries and an increase of daily travelers quota, it should gradually benefit the local hospitality sector. The current VTL quota is 4,000 travelers daily and set to increase to 6,000 when VTL to Malaysia is launched in the near term. For retention, there is a remaining S$ 3.5 million retentions left, equivalent to 0.177 cents.


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*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 and 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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