Far East Hospitality Trust posts 25.4% higher DPS of S$0.0217 for H2

FAR East Hospitality Trust’s (FEHT) distribution per stapled security (DPS) for the second half ended December 2023 rose 25.4 per cent to S$0.0217, from S$0.0173 in H2 FY2022.

Gross revenue gained 28.6 per cent year on year to S$54.8 million. The stapled hospitality group registered higher revenue contributions across all business segments – particularly in the hotel segment, where contributions grew 36.5 per cent to S$41 million.

Based on the stapled hospitality group’s H2 and full-year results released on Wednesday (Feb 14), revenue per available room (RevPAR) for hotels rose 19.9 per cent to S$140.

Average occupancy improved 2.6 percentage points to 81.7 per cent, resulting in a 16.1 per cent higher average daily rate (ADR) of S$171.

Within the serviced residences segment, revenue per available unit (RevPAU) improved 10.7 per cent to S$234.

Average occupancy rose 0.9 percentage point to 87.4 per cent compared with the previous year, while ADR was up 9.5 per cent to S$267.

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FEHT’s net property income (NPI) for H2 rose 24.8 per cent year on year to S$49.8 million, from S$39.9 million.

Over the latest half-year period, S$2.3 million of taxable income available for distribution was released to stapled securityholders.

As a result of the higher NPI and distribution of other gains, distribution to stapled securityholders increased 26.3 per cent to S$43.5 million in H2. 

Meanwhile, the income available for distribution rose 32.4 per cent year on year to S$40 million.

For the full year, FEHT’s gross revenue rose 27.8 per cent on the year to S$106.8 million, while NPI was 27.7 per cent higher at S$98.7 million.

FY2023 hotel RevPAR was up 47.8 per cent to S$136, with average occupancy up 6.3 percentage points to 80.1 per cent, and ADR rising 36.1 per cent to S$170.

RevPAU for serviced residences grew 17 per cent to S$229, while average occupancy was up 0.3 percentage point to 87.8 per cent, with ADR rising 16.6 per cent to S$260.

Income available for distribution was up 27.3 per cent to S$75.1 million, resulting in a 25.1 per cent higher DPS of S$0.0409 compared with S$0.0327 in FY2022.

FEHT is a stapled hospitality group comprising a real estate investment trust (Reit) and a business trust which has been dormant since FEHT’s listing. 

Gerald Lee, chief executive of the Reit manager, noted that the stapled group’s FY2023 distribution income surpassed pre-pandemic levels in 2019. FEHT is “well-positioned to ride on the further recovery of the hospitality sector”, he added.

“While challenges remain in the short to medium term, the manager will continue to explore all opportunities to further grow revenue and distribution to stapled securityholders in the year ahead.”

As at end-December 2023, the stapled group’s investment property portfolio valuation stood at S$2.51 billion, up 2.6 per cent or S$59.2 million, from S$2.45 billion the prior year.

DBS Group Research said that the valuation gain was “well supported” by FEHT’s underlying cash flow with “further upside concentrated within the hotels segment”.

It believes the group’s hotel room inventory – which hit an “operational ceiling” due to government quarantine contracts last year, along with rebranding and refurbishment works at certain assets – should be fully released into the market going into 2024 to potentially command higher rates upon completions of asset enhancement initiatives.

“We see FEHT’s offerings within the upscale hotel tier to be in the sweet spot for the return of budget-conscious and corporate travellers, or the group of travellers that will be catalysed by flight recovery and moderation in ticket prices,” said analyst Geraldine Wong in a note on Wednesday.

In her view, the “pocket-friendlier” range of S$200 to S$300 per night will continue to appeal to the mass market segment travellers which the stapled group has the largest exposure to.

Stapled securities of FEHT : Q5T 0% were trading flat at S$0.64 as at 10.18 am on Wednesday, after the release of its results announcement.