Far East Hospitality Trust, OUE H-Reit most affected by softer tourism numbers: Moody's

A MOODY'S report has said that of the three Singapore hospitality trusts that it rates, Far East Hospitality Trust (FEHT) and OUE Hospitality Real Estate Investment Trust (OUE H-Reit) are the most adversely affected by lower tourism numbers in Singapore.

The report, released last week, said that FEHT's and OUE H-Reit's aggregate Ebitda (earnings before interest, taxes, depreciation, and amortisation) are expected to grow by less than 2 per cent in the fiscal year ending Dec 31, 2015. FEHT is rated "Baa2, stable", while OUE H-Reit is rated "Ba1, stable" by Moody's.

"On Feb 11, 2015, the Singapore Tourism Board announced that tourist arrivals fell 3.1 per cent year-over-year in 2014, and total tourism receipts for 2014 were at the same level as in 2013," the report noted.

"In FY2015, we expect that (FEHT's) adjusted debt/total deposited assets ratio and adjusted Ebitda interest coverage will weaken to 32 per cent-35 per cent and 4.5x-5.0x respectively, as it continues to draw down debt for the funding of its Sentosa hotel development joint venture with Far East Organization Centre Pte Ltd," the report said.

For OUE H-Reit, over the next 12 months, its adjusted debt/total deposited assets is expected to be around 40 per cent to 45 per cent, and adjusted Ebitda interest coverage will fall in the range of 6.4x-6.6x, assuming the trust takes on additional debt of around S$400 million-S$500 million to fund the acquisition of Crowne Plaza Changi Airport, the report added.

The third hospitality trust rated by Moody's, Frasers Hospitality Trust, is "the least exposed to the Singapore market, and the least impacted by the weaker hospitality outlook for the country", the report said, because it gets about one-third of its revenue from Singapore. Frasers Hospitality Trust has a "Baa2, stable" rating with Moody's.