Far East Hospitality Trust - Variable Hotel Rents Re-emerge!

Far East Hospitality Trust - DBS Research 2022-10-28: Variable Hotel Rents Re-emerge!

SGinvestors.io

Published: 2022-11-05 05:26 AM

FAR EAST HOSPITALITY TRUST (SGX:Q5T)

Far East Hospitality Trust (SGX:Q5T) reported 3Q22 gross revenue of S$21.2m (+2.0% y-o-y). This was led by higher contribution from the hotels segment which increased 4.7% y-o-y to S$14.9m to partially offset the y-o-y decline in income from Serviced Residence (SR) and commercial premises from the divestment of Central Square (completed in 1Q22).
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Correspondingly 3Q22 distributable income rose 12.0% y-o-y to S$15.14m, on interest savings due to ~S$260m repayment of debt in conjunction with Central Square’s divestment.
On a year-to-date basis, gross revenue of S$62.2m was flat y-o-y.
Far East Hospitality Trust's 9M22 distributable income of S$44.1m (+14% y-o-y) made up 76% of our full year forecast (excluding the calculation of capital gains, which will not be paid evenly across the financial year).
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Average daily rate (ADR) and revenue per available room (RevPAR) continue to see q-o-q improvements for both the hotel and SR segments of Far East Hospitality Trust.
For the quarter, hotel ADR at S$137 (+108% y-o-y) and RevPAR of S$105 (+102% y-o-y) was an improvement from 1H22 levels of S$99 and S$67 respectively.
Hotel occupancy in 3Q22 at 76% was flat y-o-y and was an improvement from 68% reported in 1H22. This was due to the exit of some portfolio hotels from the government booking scheme and the temporary closure of Elizabeth Hotel which was undergoing renovation and has since reopened as the rebranded Vibe Hotel in early Sep’22 with higher room rates.
Four portfolio hotels are currently under the government booking scheme on rates comparable to market rates, with expiries between end-22 – Jan-23.
We note that the hotels segment saw the first inflow of variable rents this quarter at S$14.9m, above the quarterly fixed rent of S$14.25m, which we suspect is led by portfolio winners situated within the central business district area.
On a 9M22 basis for the hotels, the corporate segment continues to make up the bulk of room demand, contributing 70.6% of revenue by demand source. Top source countries of demand were guests from Southeast Asia (42%), Europe (19%) and North Asia (15%); Far East Hospitality Trust’s top 3 markets contributed 75% of total revenue.