3Q13 results in line
- 3Q13 DPU of 1.41 S cents
- Hotels outperform peers
- Maintain HOLD
3Q13 as expected
Far East Hospitality Trust (FEHT) announced 3Q13 results that were in line with ours and the street’s expectations. 9M13 distribution per stapled security of 4.22 S cents formed 74% of ours and 73% of the street’s prior FY13 forecasts. Gross revenue for was S$31.5m or 9.4% lower than management’s forecast (based on IPO prospectus and the circular for the acquisition of Rendezvous). Net property income was 9.4% below forecast at S$28.5m. Income available for distribution was S$24.2m or 7.4% below forecast. 3Q13 distribution per stapled security was 1.41 S cents or 7.8% lower than forecast. However, we emphasize that the results were within expectations for the market.
RevPAR down 2.7% YoY
RevPAR for the hotels, excluding the Rendezvous property (which was acquired on 1 Aug), was S$167.1, 10.2% below forecast and down 2.7% YoY mostly due to price competition in the sector. Average room rates were lower by 1.9% YoY, while occupancy was ~0.7 ppt softer YoY at 86.7%. FEHT’s mid-tier hotels saw RevPAR decline 0.4% YoY, while RevPAR for its upscale hotels fell 10.1%, affected by lower corporate spending. Management anticipates a subdued 4Q13, although RevPAR could show moderate growth in 2014. Rendezvous property is tracking in line with its expectations. FEHT’s hotels continued to perform relatively well compared to the industry. Mid-tier and upscale categories in industry-level data demonstrated declines of ~2% and ~12% respectively. The serviced residences registered RevPAU that was higher by 2.3% YoY at S$227.1, although this was 0.6% lower than forecast. Management is seeing increased competition for stays of 6-months or longer, and it warns that competition could increase further next year.
Management has plans for ~10% of their room inventory to undergo AEI starting from next year, and will spend ~S$10m in capital expenditure. This is also in line with our expectations.
We maintain a FV of S$0.92 and HOLD rating on FEHT. We forecast a FY13 yield of 6.3%.