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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. Read More

Summary of REITs Financial Results in 1Q2016

Most or all of the REITs in my portfolio have completed announcing their 1Q2016 results. There are some hits and some misses. As shown in the table I summarized below, Distribution Per Unit (“DPU”) increases for 6 out of 11 REITS I am holding while DPU fell for the other 5.

DPU fell for those REITs that focuses on a single industry sector such as industrial, retail or office. REITs like Suntec REIT which has a combination of office and retail survived the economy downturn. Mapletree Commercial Trust did fairly well too as it has a combination of office and retail (Vivocity).

Those with overseas assets did well too. Frasers Commercial Trust has both Singapore and Australian properties. Lippo Malls Indonesia Retail Trust did well as its malls are in Indonesia.

Having said so much, I just want to highlight the importance of diversification of portfolio.

Stock Name

Date Of Release

Of

Financial Results

Dividend Per Unit (DPU)

Increase or Fall

Frasers Commercial Trust Wednesday, 20 January 2016 DPU Increase
CapitaMall Trust Friday, 15 April 2016 DPU Increase
Keppel Reit Thursday, 14 April 2016 DPU Fall
Soilbuild Business Reit Thursday, 14 April 2016 DPU Fall
Suntec REIT Thursday, 21 April 2016  DPU Increase
Mapletree Commercial Trust Tuesday, 26th April 2016   DPU Increase
Parkway Life Reit Tuesday, 26th April 2016   DPU Fall
Far East Hospitality Trust Wednesday, 27th April 2016   DPU Increase
Cambridge Industrial Trust Thursday, 28th April 2016   DPU Fall
Lippo Malls Indonesia Retail Trust Tuesday, 3rd May 2016   DPU Increase
OUE Hospitality Trust Friday, 6th May 2016 DPU Fall

Far East Hospitality Trust DPU Rises for 1Q2016

Far East Hospitality Trust Logo

On 27th April 2016, Far East Hospitality Trust announces its 1Q2016 financial results. Gross revenue remains flat at S$27.4 million. Net property income increase slightly by 0.8% from S$24.5 million to S$24.7 million. A Distribution Per Unit (“DPU”) of 1.08 cents was declared which is a 0.9% increase as compared to 1.07 cents in 1Q2015.

The slight 1.9% increase in distribution amount was due to the slight increase in tourist arrivals in the first two months of the year.

1Q2016
(S$’000)
1Q2015
(S$’000)
YoY(%)
Gross Revenue 27,365 27,365 0
Net Property Income 24,679 24,487 0.8
Distributable Amount 19,444 19,203 1.3
Distribution Per Unit (“DPU”) (cents) 1.08 1.07 0.9

Occupancy

Far East Hospitality Trust Occupancy 1Q2016

Hotels

Singapore held the biennial Singapore Airshow earlier this year which provided some uplift. However, the hospitality sector still appears weak due to lack of corporate demand. Revenue per available room (“RevPAR”) was flat at S$141.

Serviced Residences

Revenue per available room (“RevPAR”) for serviced residences fell 8.7% to S$188. This was due to weaker demand as well.

Debt Maturity Profile

$50 million of Far East H-Trust’s floating-rate debt was hedged, increasing the proportion of debt secured at fixed interest rates to 65% from 59%. The current weighted average debt to maturity is 3 years.

Catalyst

Personally, my opinion for the catalyst of Far East Hospitality Trust will be the increase in international visitor arrivals. More international events held in Singapore can boost international visitor arrivals.

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