Tuesday, August 13, 2013

Far East Hospitality Trust: 2Q13 below expectations (OCBC)

Far East Hospitality Trust:
Fair value S$0.92
add: 12m dividend forecast S$0.057
versus: Current price S$0.920

2Q13 below expectations
• Hotel RevPAR misses forecasts by 11%
• 3Q13 performance could be like 2Q13’s
• Decrease FV to S$0.92

2Q13 results for Far East Hospitality Trust (FEHT) were below our expectations and the street’s. Gross revenue was S$29.3m or 7.9% lower than the IPO prospectus forecast, affected by the hotels' performance.
Net property income and income available for distribution came in at S$26.9m and S$23.2m, which were 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 DPS was 1.43 S cents; 1H13 DPS of 2.81 S cents tracked below our expectations, corresponding to 47% of our prior FY13 estimate of 6.0 S cents, which we now lower to 5.7 S cents. We have transitioned to a DDM-based model, from a RNAV model previously. Adjusting our FY13F revenue assumptions downwards, our FV falls to S$0.92 from S$1.01. We maintain a HOLD rating on FEHT and estimate a FY13 yield of 6.2%.

Missing prospectus forecasts
2Q13 results for Far East Hospitality Trust (FEHT) were below our expectations and the street’s. Gross revenue was S$29.3m or 7.9% lower than the IPO prospectus forecast. Net property income and income available for distribution came in at S$26.9m and S$23.2m, which were 6.8% and 4.1% below the IPO forecasts, respectively. 2Q13 DPS was 1.43 S cents; 1H13 DPS of 2.81 S cents tracked below our expectations, corresponding to 47% of our prior FY13 estimate of 6.0 S cents, which we now lower to 5.7 S cents.

Better-than-industry performance
FEHT's hotels performed relatively well compared to the industry, which saw 2Q13 RevPAR fall ~2% YoY. 2Q13 RevPAR for FEHT's hotels was S$168, 11% lower than the IPO prospectus forecast of S$189 but 0.3% higher YoY. Average room rates were down 5% YoY, while occupancy was ~4.7 ppt higher YoY at 87.7%. FEHT's mid-tier hotels saw RevPAR climb 1.0% YoY, while RevPAR for its upscale hotels fell 1.4%, affected by reduction in corporate spending. In comparison, mid-tier and upscale categories in industry-level data demonstrated declines of ~3% and ~14% respectively. The serviced residences generally performed in line with expectations, with RevPAU of S$230, versus S$228 in the prospectus forecast. The focus for the serviced residences is relatively longer-stay business to increase occupancy.

3Q13 expected to be similar to 2Q13
Management expects that the 3Q13 operational performance will be similar to 2Q13 given the continued growing supply of hotel rooms in Singapore, which will probably continue to put pressure on room rates. FEHT completed the acquisition of Rendezvous Grand Hotel Singapore on 1 Aug and the manager believes that room rates can be slowly moved up (honoring previous corporate rates signed).

Maintain HOLD
We have transitioned to a DDM-based model, from a RNAV model previously. Adjusting our FY13F revenue assumptions downwards, our FV falls to S$0.92 from S$1.01. We maintain a HOLD rating on FEHT and estimate a FY13 yield of 6.2%.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 07/08/13

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