Far East Hospitality Trust H2 DPS climbs 10.9% as serviced residences performed above fixed rent

FAR East Hospitality Trust's (FEHT) Q5T distribution per stapled security (DPS) for the second half of the financial year ended Dec 31, 2021 increased to S$0.0153, a growth of 10.9 per cent compared to S$0.0138 in the same period last year.

In its financial results released on Tuesday morning (Feb 15), the hospitality stapled group's manager declared a distribution of S$30.3 million for H2 FY2021, up 11.6 per cent on-year from S$27.1 million.

Stapled securityholders can expect to receive their DPS of S$0.0153 for the period Jul 1 to 31 Dec, 2021, on Mar 23, after the Feb 23 record date.

The group's gross revenue for H2 FY2021 was S$41.7 million, 6.9 per cent higher year on year from S$39 million.

This was largely due to the master lease rental for its hotel segment remaining at the fixed rent level, while its serviced residences (SRs) segment had variable rent and performed higher than the fixed rate, its manager said.

The group's net property income for H2 FY2021 gained 16.1 per cent to S$39 million, from S$33.6 million a year ago.

These gains were despite the group's hotel segment performing poorly in H2 FY2021, as there was a reduction in room night volume from companies housing their foreign workers.

The hotel segment's revenue per available room (RevPAR) fell 6.3 per cent year on year to S$60 from S$64.

The average H2 occupancy for its hotels also declined year on year to 81.1 per cent from 92.5 per cent, although the average daily rate (ADR) was 7.2 per cent higher at S$74 from S$69 in the year-ago period, which the manager attributes to the gradual change in guest mix towards higher rated leisure travellers and corporate businesses.

Meanwhile, the SRs segment posted a 6.5 per cent decline in revenue per available unit (RevPAU) to S$143, from S$153 in H2 FY2020.

SRs average occupancy also went down to 78.8 per cent from 84.9 per cent on-year from the curtailed inbound travel, while its ADR grew marginally by 0.6 per cent to S$181 from S$180.

However, due to long-stay corporate sources minimising negative impact from Covid-19, FEHT's SRs performed above fixed rent and the loosening of travel restrictions led to a strong rebound in the last quarter of FY2021, its manager said.

As for its retail and office spaces, revenue jumped 11 per cent year on year to S$7.7 million in H2 FY2021 from S$7 million due to lower rental rebates provided to retail and office tenants in that half, offset by lower occupancies.

For the full FY2021, gross revenue held steady at S$83.2 million, while net property income rose 4.1 per cent year on year to S$75.2 million, from S$72.2 million.

DPS for the full year therefore went up 9.1 per cent to S$0.0263, from S$0.0241 in FY2020.

The manager said that the loosening of border restrictions and vaccinated travel lanes provided a boost to the hospitality industry in the final quarter of 2021.

Its hotel portfolio was also supported during the year by contracts from the government for isolation purposes, business from companies requiring long-stay accommodation for their workers and domestic staycation demand.

However, hotel RevPAR still declined by 21.1 per cent to S$56, from S$71 in the previous year, while the SRs segment logged a RevPAU of S$140, dipping 11.9 per cent year on year from S$159.

While FEHT's manager believes the near term remains uncertain, it is optimistic about the longer-term prospect of the hospitality industry, given the "continuing efforts by the government and the industry to build Singapore into an attractive destination for investments, MICE (meetings, incentives, conferences and exhibitions) and leisure".

It added that the proposed divestment of Central Square will provide the trust with "a strengthened balance sheet and increased financial flexibility". The divestment is expected to complete on Mar 24 and net proceeds will be used to pare down debt.

Stapled securities of FEHT ended Tuesday at S$0.585, up 2.6 per cent or S$0.015.

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