Far East Hospitality Trust Undervalued or Value Trap?

Far East Hospitality Trust Logo

Far East Hospitality Trust makes up a minor 2% in my stock portfolio. Finally, I have decided to cut loss and sold off Far East Hospitality Trust in my stock portfolio. Despite collecting the dividends over the years, I still made a loss of 20%.

I bought Far East Hospitality Trust in my early investment days where I knew nothing about analyzing a good stock. It was purely bought on speculation after reading about it being undervalued. Well, I cannot say I am good at picking a good stock nowadays but I know some basic fundamentals to look out for.

Why I Sold Far East Hospitality Trust?

1. Falling Share Price

Share price has been declining since 2013. There are no signs of recovery.

2. Dividend Yield Give False Impression

Year on year, dividend yield is slightly increasing. If you look closely into the dividend amount, it is in fact decreasing over the years. Far East Hospitality Trust is cutting dividends and with its decreasing share price, it paints a false picture of an increasing dividend yield!

This is because: Dividend Yield = Dividend Amount / Share Price

Thus, the lesson learnt here is not to simply look at the Dividend Yield.

Year Dividend Amount Dividend Yield
2016 0.0438 6.99%
2015 0.0471 6.31%
2014 0.0528 6.29%
2013 0.0631 6.19%

3. Bought on Speculation

Like I said, I bought Far East Hospitality Trust on pure speculation. You may have guessed it, I bought at a wrong price whereby there is no margin of safety. Selling it is the best option to do as I can recycle the cash from the sale into other stocks or REITs in my stock portfolio.

4. Stop Blaming on Poor Tourism Outlook

In every quarter presentation slides, you always see the last few slides mentioning about poor tourism outlook. Personally, I felt the manager for Far East Hospitality Trust can do better than this. Taking OUE Hospitality Trust as a comparison, the hospitality segment posted an increase in 4Q2016 as compared to 4Q2015.

Lastly, Far East Hospitality Trust shall be posting their 4Q2016 financial results on 22nd February 2017. Let us await and see if the value can be unlocked around this time!

3 thoughts to “Far East Hospitality Trust Undervalued or Value Trap?”

  1. Hi SR

    Indeed i think feht has been poor not simply.because of tourism or supply but the management and sponsor has not been able to help them boost their performance in hard times like this. E.g asset aei or acquisitions to boost npi of the assets.

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