Far East Orchard reaps the rewards of its growth strategy

SINCE Alan Tang took on the mantle of Far East Orchard’s (FEOR) chief executive officer in 2020, the group has been hard at work in building its lodging platform, honing in on student housing and hospitality to deliver growth and returns. And that has reaped results.

For the first nine months of its latest financial year ended September (9M FY2024), FEOR’s earnings have more than doubled year on year to S$16.9 million, from S$7.6 million in the first nine months of FY2023.

9M FY2024 revenue was up 4.5 per cent to S$140.1 million, from S$134.1 million in the same period last year. Revenue for 9M FY2024 was around 76.3 per cent of FY2023’s full-year revenue of S$183.6 million.

For comparison, FEOR recorded earnings of S$1.5 million on revenue of S$112.2 million in FY2020 – the first full-year following Tang’s appointment to the helm.

Tang attributed much of the growth to the group’s clear vision and mission of being an enduring real estate enterprise in Singapore, delivering steadfast growth to stakeholders.  

From that came the FEOR 25 strategy, the company’s current five-year plan to grow its recurring income stream by riding on hospitality and student accommodation – chosen based on its existing niche in the two sectors, said Tang. 

He pointed out that the two sectors are complementary as well, with hospitality assets being generally resilient to inflation since “people will always want to travel”, while purpose-built student accommodations (PBSA) are “good natural diversifiers” and a countercyclical tool to hotels and the like. 

The UK’s PBSA market – where most of FEOR’s beds are – has a structural supply-demand gap that makes it a favourable market to continue exploring, Tang added. “Demand will continue to outstrip supply with projected full-time undergraduates growing at a faster pace than PBSA pipelines, and this will continue to fuel rental growth.” 

Tackling targets

Under the FEOR 25 strategy, the group aims to grow its hospitality and PBSA portfolios to 25,000 rooms and 5,000 beds, respectively, by 2025.

It also planned to grow its lodging platform into a “vertically integrated ecosystem spanning key capabilities such as asset management, operations and investment” across the business, said Tang. “(This) also gives us the leeway to expand our business segments horizontally to other accommodation types and services.”

Currently, Tang said, the group is on track to hit most of its targets, but there are admittedly some wins and some losses. 

In the hospitality sector, for instance, FEOR now has more than 17,000 operational rooms across its entire hospitality portfolio with 1,400 rooms in the pipeline. That puts the total at nearly 19,000 rooms, still some way to go to reach the 25,000 rooms it hoped to have by next year.

“Even with one year to go, that’s still quite a stretch, I would say,” Tang acknowledged. 

On the other hand, the group has about 3,700 operational beds in its PBSA portfolio, with another thousand under development. This works out to just under 5,000 beds – well before the 2025 deadline. 

Furthermore, FEOR acquired in April a 49 per cent stake of Homes For Students, a UK-based PBSA operator managing over 40,000 beds across the UK.

Writing the next chapter

Meanwhile, the group’s plan for the next five years after 2025 is still up in the air. What is certain is that FEOR’s next five-year strategy will continue building on its vision and mission, said Tang. 

Tang added that the group will also remain agile and flexible to pivot if necessary. 

This could mean diversifying its lodging platform beyond hospitality and PBSA, especially since there are many other sectors to potentially explore, such as co-living and build-to-rent accommodation. 

Even within the PBSA and hospitality segments, Tang noted that there is still room for growth and expansion across other geographies. 

He cited Japan as an example for hospitality – covering the cities of Tokyo, Osaka and Fukuoka would give the group five to 20 properties easily, since the market is so large and deep, said Tang.  

On the PBSA front, he noted that with the Homes For Students operating platform in the UK, the group could expand to other European cities, as they are on the same side of the pond. 

But he emphasised that the group “cannot just be fixated on lodging” assets. “Right now, the focus is not on (property development or investment, two of FEOR’s other business segments), but it doesn’t mean it will never be,” he said. 

In the meantime, he highlighted the importance of staying true to the group’s long-term goals over chasing short-term profits. “It is a fairly deliberate act to keep the longer-term picture in mind – sticking to it and now we’ve seen some fruits.”