Far East Hospitality Trust 2Q DPS fall 4% to 0.97 cent on lower revenue

While demand for hotel accommodation was firmer over the quarter, with average occupancy rising 1.9 percentage points to 87.1% from 85.3% in 2Q16 due to the REIT’s shift towards the leisure segment, the average daily rate fell by 0.6% to $154 compared to $160 a year ago, resulting in a corresponding revenue per available room (RevPAR) decreased of 1.3% to $134 for the hotel portfolio.

Meanwhile, both the SR portfolio’s average occupancy and average daily rate (ADR) fell 4.5 percentage points and 0.6% on-year, respectively, resulting in a decline in revenue per available unit (RevPAU) by 5.7% to $177 in 2Q.

Revenue from retail and office spaces was relatively stable at $5.8 million.

FEHT’s gearing ratio as at end-June was 32.8%, while its weighted average debt maturity was 3.4 years. 71% of its debt remained secured at fixed interest rates, and the average cost of debt was approximately 2.5% per annum.

In its outlook, the REIT manager says it expects the hospitality operating environment to remain competitive in the next few quarters head, as demand for accommodation from the corporate segment continues to be soft. This would impact FEHT’s SRs, which mainly serve corporations, to a larger extent as compared to hotels, it adds.

In addition, demand-supply dynamics for hotels are expected to improve in 2018 as the supply of new hotel rooms tapers off.

FEHT’s manager says it will continue to drive the performance of the REIT’s assets, and selectively upgrade its existing properties. It also expects the trust to benefit from developments in the tourism industry, as well as the expansion of airport infrastructure to grow Singapore’s status as an air hub.

Units in FEHT closed flat at 67 cents on Thursday.