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REITs investment & personal finance


Thursday, February 24, 2022

Far East Hospitality Trust Review @ 24 February 2022

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

Gross revenue, NPI, distributable income and DPU have improved YoY due to higher revenue from Hotels, lower rental rebates provided to retail/office tenants and lower finance costs.

Revenue Per Available Room

REVPAR for both hotels and serviced residences have improved in 4Q 2021. 

Divestment
On 2 December 2021, FEHT announced for divestment of Central Square. The sales consideration is S$ 313.2 mils, which is 15.4 % above the valuation of S$ 271.4 mils and 70.8% above purchased price of S$ 183.3 mils. There is an additional incentive fee of up to S$18.0 mil, subject to certain conditions
being fulfilled by 31 December 2023. The divestment is expected to be completed in March.

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 52.455%
  • REIT manager's shareholding is high at 5.555%
  • Directors of REIT manager's shareholding is high at 0.166%

Lease Profile

  • WALE is long at 9.02 years
  • Highest lease expiry within 5 years is low at 7.8% which falls in this year (assume same expiry profile for RCP)
  • Weighted average land lease expiry is moderate at 61.33 years

Debt Profile

  • Gearing ratio is moderate at 38.3%
  • Cost of debt is low at 1.9%
  • Fixed rate debt % is low at 52.7%
  • All debts are unsecured debts
  • WADM is slightly short at 2.7 years
  • Highest debt maturity within 5 years is low at 23.7% which falls in 2024
  • Interest coverage ratio is low at 3.4 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 15.2% 
  • Top 10 tenants contribution is high at 79.3%

Key Financial Metrics

  • Property yield is low at 2.9% 
  • Management fees over distribution is high at 18.2% in which unitholders receive S$ 5.49 for every dollar paid 
  • Distribution on capital is low at 2%
  • Distribution margin is high at 62.4%

Trends

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

Relative Valuation

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

Author's Opinion

 Favorable Less Favorable
Diversified SectorLow Fixed Rate Debt %
High REIT Sponsor's ShareholdingLow Interest Coverage Ratio
High REIT Manager's ShareholdingHigh Top Geographical Contribution
High Directors of REIT Manager's ShareholdingHigh Top Tenant & Top 10 Tenants Contributions
Long WALELow Property Yield
No Major Lease Expiry within 5 YearsNon-Competitive Management Fees
Low Cost of DebtLow Distribution on Capital
100% Unsecured DebtDPU Downtrend
Well Spread Debt MaturityNAV per Unit Downtrend
Low Top 5 Properties ContributionInterest Coverage Ratio Downtrend
High Distribution MarginProperty Yield Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

The divestment of Central Square would be a good boost to FEHT balance sheet and fundamentals where the gearing ratio would be reduced and NAV per unit would be increased. As for the pro-forma DPU, it would be more or less the same as existing as per the divestment announcement. With the gradual resumption of travel couple with more and more VTLs announced, FEHT performance is expected to recover moving forward.


You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts


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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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