Far East Hospitality Trust Review @ 21 June 2022

Basic Profile & Key Statistics

• Main Sector(s): Hospitality, Retil & Office
• Country(s) with Assets: Singapore
  
• No. of Properties (exclude development/associate/fund): 12

Performance Highlight

Gross revenue declined yoy due to divestment of Central square in March 2022, resulting in early termination and non-renewal of leases. However, NPI has improved yoy due to lower property tax and lower expenses for commercial premises. Distributable income increased yoy due to improved NPI and lower financial expenses.

Revenue Per Available Room

Both REVPAR for hotel and serviced residences have improved yoy.

Divestment

The divestment of Central Square has completed on 24 March 2022.

Asset Enhancement Initiative

The refurbishment of the lobby for Regency House is expected to be complete by 3Q 2022. While for The Elizabeth Hotel, upgrading of reception, common areas and guestrooms are ongoing and expected to open in phase starting from 3Q 2022.

Related Parties Shareholding

• REIT sponsor's shareholding: Above median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

• WALE: Above median for more than 20%
• Highest lease expiry within 5 years: Below median for more than 20%; Falls in this year
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: Below median for more than 10%
• Cost of debt: Below median for more than 20%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: 100%
• WADM: Above median for more than 10%
• Highest debt maturity within 5 years: ± 10% from median; Falls in 2024
• Interest coverage ratio: Below median for more than 10%

Diversification Profile

• Top geographical contribution: Above median for more than 20%
• Top property contribution: ± 10% from median
• Top 5 properties' contribution: ± 10% from median
• Top tenant contribution: Above median for more than 20%
• Top 10 tenants' contribution: Above median for more than 20%

Key Financial Metrics

• Property yield: Below median for more than 20%
• Management fees over distribution: Above median for more than 10%; $5.92 distribution for every dollar paid 
• Distribution on capital: Below median for more than 20%
• Distribution margin: Above median for more than 20%

Trends

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

Relative Valuation

• P/NAV: Average for 1y, 3y & 5y
• Dividend Yield: Average for 1y & 3y; Below average for 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Short Weighted Average Land Lease Expiry
High REIT Sponsor's Shareholding	Low Interest Coverage Ratio
High REIT Manager's Shareholding	High Top Geographical Contribution
Directors of REIT Manager's Shareholding	High Top Tenant & Top 10 Tenants Contributions
Long WALE	Low Property Yield
No Major Lease Expiry within 5 Years	Non-Competitive Management Fees
Low Gearing Ratio	Low Distribution on Capital
Low Cost of Debt	DPU Downtrend
100% Unsecured Debt	NAV per Unit Downtrend
Long WADM	Interest Coverage Ratio Downtrend
High Distribution Margin	Property Yield Downtrend
	Distribution on Capital Downtrend

The REVPAR of FEHT has shown gradual recovery, especially for the serviced residences, which is higher than 4Q 2021. With the border opening starting 1st April and the further easing of border measures starting 26 April, FEHT performance is expected to gradually improve moving forward.

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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 due to 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.