■ 3Q15 DPU of 1.2 Scts (-9% yoy, +3% qoq) broadly in line with expectations.
■ Seasonal uptick + lower room rents help to stabilize hotel occupancy. Service residences comparatively worse off, with drop-off in corporate demand.
■ Watch the supply bump in 4Q; maintain Hold.
Softer macro conditions, strong S$ & haze led to 5% yoy dip in NPI
● On the back of softer macro conditions, a strong S$ and the outbreak of the haze, FEHT reported a 5% yoy dip in NPI for 3Q15 (S$26.9m). On a qoq basis, a seasonal uptick in tourist arrivals vs. 2Q and lower ADRs arrested the quarterly declines, and NPI grew 3% qoq.
Uptick in arrivals & lower room rents kept hotel occupancy steady
● An uptick in tourist arrivals and competitive room rents (S$172, -6% yoy) kept hotel occupancy steady at 87.4%. As a result, RevPar slid 5.6% yoy to S$151. Chinese visitors in Singapore grew 3.1% yoy and helped offset slower visitors from Indonesia,, Australia and Japan (afflicted by weak currencies).
● In 8M15, visitor arrivals dipped 0.6% to 10.2m. However, STB still expects Singapore to remain on track to receive 15.1-15.5m visitors in 2015 (2014: 15.1m), implying a back-end-loaded year.
Service residences comparatively worse off with drop-off in corporate demand
● Affected by ongoing renovation at Regency House (to be completed by 1Q16) and a drop-off in corporate demand, service residences were comparatively worse-off. Average occupancy dropped 2% pts yoy to 90.2%. FEHT lowered ADR by 7.2% to S$232 to attract group demand. RevPar correspondingly fell 9.2% yoy to S$209.
● By industry, the group saw contributions from FIs dropping to 17.9% of revenue for 3Q15 (3Q14: 27.6%) and Oil & Gas dropping to 11.9% (3Q14: 13%). The services sector was the bright spot, increasing to 30.1% (3Q14: 28.4%).
● The retail and office spaces continued to provide stability in the portfolio, with revenue growing 3.8% yoy to S$6.1m.
Watch the supply bump in 4Q; maintain Hold
● With South Beach (upscale segment) and Hotel Boss (mid-tier) expected to open in 4Q, we believe that FEHT may have to lower room rates further to maintain occupancies and market share. More importantly, South Beach and Hotel Boss account for around half of the 4,272 incoming rooms for 2015. Hence, we maintain our Hold recommendation and keep our DDM-based target price unchanged. (Read Report)
Read Related Report
1) Far East Hospitality Trust - Analyst Briefing Key Takeaways by Phillip Securities Research, published on 4 November 2015
Source : CIMB Research