Brokers’ take: Analysts bump up FEHT targets after raising DPS estimates

MAYBANK Securities and CGS-CIMB have raised their target prices on Far East Hospitality Trust (FEHT) after raising their distribution per stapled security (DPS) forecasts for the trust.

Both research teams maintained their “buy” calls on the counter, noting FEHT’s “strong” first quarter performance. The hospitality trust on Thursday (Apr 28) posted a 17.2 per cent rise in its distributable income to S$14.7 million for the 3 months ended Mar 31. It also reported a marginal drop in gross revenue by 1.6 per cent to S$21 million over the same period.

In a report dated on Thursday, Maybank Securities has raised its target price to S$0.80 from S$0.70. This implies a potential upside of 16.8 per cent from FEHT’s last trading price of S$0.685 on Friday as at 1.49 pm. FEHT stapled securities were trading 0.7 per cent or S$0.005 higher at the time.

Maybank had raised its DPS forecasts by 8-10 per cent after accounting for higher revenue per available room (RevPAR). It expects fundamentals to improve in a “seasonally stronger” H2, said analyst Chua Su Tye.

In a separate report, CGS-CIMB raised its target price to S$0.78 from S$0.75, representing a potential upside of 13.9 per cent. The research team raised its targets after lifting its FY2022-24 DPS estimates for FEHT by 4.7-5.8 per cent on lower interest expense due to lower debt level.

“We believe FEHT will continue to benefit from the expected increase in tourist arrivals following Singapore’s relaxation of border restrictions,” said CGS-CIMB analyst Lock Mun Yee.

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Maybank’s Chua also expects management to prioritise growth in assets under management from FEHT sponsor’s Singapore assets, ahead of overseas diversification as the hospitality trust eyes acquisition opportunities.

FEHT is a stapled group comprising Far East Hospitality Real Estate Investment Trust and Far East Hospitality Business Trust.