Far East Hospitality Trust

Far East Hospitality Trust (FEHT): 3Q14 DPU declined 6.4% to 1.32¢, dragged by dilution from an enlarged unit base owing to the acquisition of Rendezvous Hotel and Rendezvous Gallery in Singapore in Aug '13. Meanwhile, distributable income dipped 3.1% to $23.5m, while gross revenue and NPI slipped 1.0% and 1.2%, respectively, to $31.1m and $28.2m, on the protracted challenging operating environment, a trend since 1Q14. The average occupancy of the hotel portfolio (66.5% revenue) increased 0.8 ppt y/y to 87.1%, an improvement over the two preceding quarters, although average daily rate (ADR) slipped 4.8% to $183, dragging RevPAR lower by 3.9% to $160. Occupancy for serviced residences (14.7% revenue) improved 2 ppt to 92.2%, underpinned by longer stay business, to compensate for the drop in ADR to $250 (-1.9%), resulting in RevPAU of $230 (+0.3%). Aggregate leverage grew 0.5 ppt q/q to 31.4%, debt to maturity reduced from 2.8 to 2.5 years, while average cost of debt remained at 2.2%. In the quarter, FEHT completed two AEI projects, the refurbishment of studio apartments at Regency House and hotel rooms at Village Hotel Changi. The key catalyst for FEHT remains the 30/70 JV with parent, Far East Organization, to develop two new hotels in Sentosa, which will collectively house 850 rooms, at a total cost of $443.8m. The development remains on track for completion in 2018. At $0.835, FEHT is valued at 0.86x P/B and 6.2% 9M14 annualized yield, compared to hospitality peers' average of 0.96x and 6.7% yield.