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A Look at Far East Hospitality’s Latest Quarter

Far East Hospitality Trust (SGX: Q5T), which holds eight hotels and four serviced residences in its portfolio, saw a 9.4% shortfall in its revenue for third quarter of 2013 (3Q 2013) as compared to its initial public offering (IPO) forecast of S$34.7 million. The hotels faced strong competition and thus, there was a “stronger than anticipated price pressure on room rates”.

The net property income was at S$28.5 million and the distributable income was at S$24.2 million. The distribution per stapled security (DPS) was at 1.41 Singapore cents.

For the hotels, the average occupancy rate, average daily room rate and room revenue per available room (RevPAR) were at 86.2%, S$193.80 and S$167.10 respectively. RevPAR is obtained by multiplying the average daily room rate by its occupancy rate. CDL Hospitality Trusts (SGX: J85), another trust in the hospitality segment competing with Far East Hospitality, had a higher average occupancy rate at 87.6% for its third quarter.

On 1st August 2013, Far East Hospitality acquired Rendezvous Grand Hotel Singapore and Rendezvous Gallery from Straits Trading Company Limited (SGX: S20). Far East Hospitality mentioned that so far, the hotel has “performed in line with expectations”.

For the serviced residences, the average occupancy rate, average daily room rate and room revenue per available unit (RevPAU)were at 90.2%, S$254.40 and S$229.50 respectively. Just like RevPAR, one can arrive at the RevPAU by multiplying the average daily room rate and the occupancy rate.

As of 30th September 2013, the gearing ratio stood at 31.6% and the average cost of debt was at 2.2%. The weighted average debt to maturity is at 3.6 years. Comparatively, CDL Hospitality has a gearing ratio of 28.1% and another hospitality trust, OUE Hospitality Trust (SGX: SK7), has a gearing ratio of 33.2%. The net asset value was at $0.9532.

Just like CDL Hospitality, Far East Hospitality expects a challenging operating environment for the rest of the financial year due to higher than expected price competition from the new supply of hotels. Plans are in place for around 10% of the hotel rooms and serviced residence units in the portfolio to undergo asset enhancement initiatives in the next 12 months.

The trust last closed at S$0.895 on Friday. The price-to-book ratio is at 0.94 and the distribution yield is at approximately 6.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.