SINGAPORE (Aug 7): CIMB Research is maintaining its “hold” rating on Far East Hospitality Trust with an unchanged price target of 66 cents on an “as-it-is” basis, after the REIT’s 2Q17 results came in broadly in line with the research house’s expectations.
See: Far East Hospitality Trust 2Q DPS fall 4% to 0.97 cent on lower revenue
The trust’s performance in the latest quarter “threw no surprises” with its distribution per stapled security (DPS) of 0.97 cent, say analysts Yeo Zhi Bin and Lock Mun Yee in a Monday report, with its serviced residences (SRs) segment continuing to be impacted by the slowdown in corporate demand despite a q-o-q improvement.
The analysts however remain cognisant of investors expectations of an accretive-acquisition to take place this year, as an estimated available debt headroom of about $330 million for FEHT could be used to acquire its sponsor’s 314-room Oasia Hotel Downtown by end-2017.
Previously, CIMB had estimated a 4.5% to 12% accretion to the trust’s FY18F DPS assuming that the potential acquisition would be fully debt-funded at a 2.5% interest cost and net property income (NPI) entry yields of 4.5% to 6%.
“Looking to 2H17, and notwithstanding the higher supply in 2H17 vs. 1H17, we expect hotels’ revenue per available room (RevPAR) declines to moderate, while SRs’ revenue per available unit (RevPAU) is likely to be see a more pronounced impact compared to the hotels,” comment Lock and Yeo.
As at 10:50am, units of FEHT are trading flat at 67 cents.
