Far East Orchard sinks into the red with S$6.3m nine-month loss

MAINBOARD-LISTED hotel operator and property developer Far East Orchard has sunk into the red with a net loss of S$6.3 million for the nine months ended Sept 30, compared with a net profit of S$5.4 million a year ago.

This comes as the group's financial performance continues to be weighed down by Covid-19's impact, mainly on its hospitality business, it said in a regulatory filing on Monday evening.

Sales declined 25.1 per cent to S$84 million for the nine-month period, from S$112.1 million in the preceding year.

Meanwhile, total operating profit tumbled 74.8 per cent to S$6.4 million for 9M FY20, versus S$25.4 million for the year-ago period. Losses from the group's hospitality business were partially offset by earnings from its purpose-built student accommodation (PBSA) portfolio.

For the first nine months of the year, the group benefited from the full period of contributions from the PBSA assets acquired in 2019.

Its property development business segment also recorded profit from its joint venture development project, Woods Square, which obtained its temporary occupation permit in February this year, Far East Orchard said.

"With global travel at a standstill and Covid-19 cases resurging across numerous countries, the demand for accommodation in the hospitality industry is below historical lows. This resulted in low occupancies and significant declines in revenue per available room year on year across all the group's hotels," Far East Orchard noted.

Nonetheless in Singapore, the decline in demand continued to be mitigated by accommodation for isolation facilities and corporate lodging requirements, the latter being primarily for Malaysian workers in the Republic, Far East Orchard said.

As for its PBSA business, the group said its properties have been operational and students have checked in for the start of the UK academic year 2020/21 in September.

Although there has been a small uptick in cancellations compared with previous years and some university courses are pushed back by one semester to commence in January 2021, overall occupancy for the group's PBSA portfolio remains high at over 80 per cent as at end September 2020, Far East Orchard said.

It added that it had a "healthy cash balance" of S$276.1 million as at end September 2020, compared to S$257.4 million as at end December 2019.

Far East Orchard expects its FY20 financial performance to be "severely impacted by the challenging operating conditions".

Said group chief executive Alan Tang: "We are likely to see a protracted recovery period for the hospitality industry. Despite the challenging environment, our hospitality business has pushed ahead with numerous hotel openings this year, in Australia and Japan where hotel demand is supported by domestic travel. We will also step up in our efforts to grow our hospitality operating footprint in Asia-Pacific through management agreements."

The group said it is on track to open about 1,300 rooms this year, half of which are slated for opening in the final quarter. These will add to the group's current hospitality portfolio of 98 properties and over 16,000 rooms globally, it said.

Far East Orchard shares closed flat at S$1 on Monday, before the release of its business update.