Friday, February 21, 2014

Far East Hospitality Trust: 4Q13 results in line (OCBC)

Far East Hospitality Trust:
Fair value S$0.78
add: 12m dividend forecast S$0.055
versus: current price S$0.795
4Q13 results in line

FEHT's 4Q13 results were in line with our expectations and the street’s. FY13 distribution per stapled security of 5.64 S cents formed 101% of our forecast and 99% of the street’s median forecast. RevPAR for the hotels, excluding the Rendezvous property (which was acquired on 1 Aug 2013), was S$164.8, down 5.3% YoY, which was expected given challenging industry conditions.
There has been some weakness at the three Orchard properties, namely, Orchard Parade Hotel (OPH), Quincy and The Elizabeth Hotel, possibly due to relative interest in Marina Bay area hotels. Village Changi Hotel has been impacted by competition too. For FY14, hotel room rates for corporate accounts have been locked in at similar or slightly higher rates than last year. Corporate accounts give 35% better rates than wholesale accounts and the intention is to replace some of the wholesale business. We forecast low-to-mid single digit RevPAR growth for FEHT in FY14. Management is considering AEIs at OPH and Elizabeth Hotel starting in 4Q14. Increasing our cost of equity from 7.6% to 8.7%, we reduce our FV from S$0.92 to S$0.78 and maintain a HOLD rating on FEHT.

4Q13 as expected
Far East Hospitality Trust (FEHT) announced 4Q13 results that were in line with ours and the street’s expectations. FY13 DPU of 5.64 S cents formed 101% of our estimate and 99% of the street’s median prediction. 4Q13 gross revenue was S$33.6m or 3.0% lower than management’s forecast. Net property income was 2.4% below forecast at S$30.5m. Income available for distribution was S$25.1m or 2.2% below forecast. 4Q13 DPU was 1.42 S cents or 2.1% lower than forecast.

RevPAR down 5% YoY
RevPAR for the hotels, excluding the Rendezvous property (acquired on 1 Aug 2013), was S$164.8, down 5.3% YoY (and 9.4% below forecast), which was expected given challenging industry conditions. Average room rates were lower by 2.3% YoY, while occupancy was 2.7 ppt softer YoY at 85.4%. For FY13, FEHT's mid-tier hotels saw RevPAR decline 0.8% YoY, while RevPAR for its upscale hotels fell 6.3%, due to lower corporate spending. There has been some weakness at the three Orchard properties, namely, Orchard Parade Hotel (OPH), Quincy and The Elizabeth Hotel, possibly due to relative interest in Marina Bay area hotels. Village Changi Hotel has been impacted by competition too. FEHT's hotels continued to outperform the industry. Mid-tier and upscale categories in industry data showed declines of 3.3% and 12.7% respectively for FY13. FEHT's serviced residences clocked RevPAU that was higher by 8.0% YoY at S$226.3, 0.8% above forecast. FEHT is seeing competition from the private residential sector for longer stays. For FY14, hotel room rates for corporate accounts have been locked in at similar or slightly higher rates than last year. Corporate accounts give 35% better rates than wholesale accounts and the intention is to phase out some of the wholesale business. We forecast low-to-mid single digit RevPAR growth for FEHT in FY14. Management is considering AEIs at OPH and Elizabeth Hotel starting in 4Q14.

Maintain HOLD
Increasing our cost of equity from 7.6% to 8.7%, we reduce our FV from S$0.92 to S$0.78 and maintain a HOLD rating on FEHT.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 14/02/13

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