Far East Hospitality Trust - Phillip Securities 2024-03-30: Mega Events To Drive Revpar Recovery

• We reiterate our BUY recommendation on Far East Hospitality Trust (SGX:Q5T) with an unchanged DDM-based target price of S$0.79 and FY24e- 25e DPU forecasts of S$4.35 to S$4.45 cents. Far East Hospitality Trust's share price is currently trading at FY24e dividend yields of 6.8% and 0.7x P/NAV.
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• DPU exceeded our expectation by 7%, surging to 4.09 cents (+25.1% y-o-y), supported by a higher NPI (+27.7% y-o-y) and S$8mil distribution of divestment gain of Central Square.
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The Positives

Recovery on track.

• ADR exceeded pre-COVID levels, reaching S$170 for FY23, propelled by the recovery in flight capacity. However, RevPAR lags behind, standing at 95% of pre-COVID levels owing to a 9% gap in occupancy rates (FY19: 89.1% vs FY23: 80.1%).
• We expect RevPAR to continue trending upward in FY24, with more support from Q2 onwards due to seasonality. Income from variable rental surged by more than six times, surpassing pre-COVID levels by 1% and contributing to 25% of gross revenue amidst the leisure recovery. We expect a decline in contributions from corporate travelers, potentially driving ADR higher in the absence of corporate discounts.
• Occupancy is forecast to ramp-up in FY24e, thanks to major events such as the Taylor Swift Eras Tour and Singapore Airshow in 2024; current forward bookings appear promising.

Potential inorganic growth.

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Liu Miao Miao Phillip Securities Research | https://www.stocksbnb.com/ 2024-02-15 SGinvestors.io

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