3 Useful Things Investors Should Know About Far East Hospitality Trust’s Business

Far East Hospitality Trust (SGX: Q5T) is a stapled trust consisting of a business trust and a real estate investment trust.

Its portfolio currently has 12 properties, consisting of eight hotels and four serviced residences. Examples of hotels under the trust are The Elizabeth Hotel, Oasia Hotel Novena, and The Quincy Hotel.

The trust’s 12 properties are in Singapore and are located within close proximity to business districts, leisure attractions, MICE (meetings, incentives, conventions, and exhibitions) facilities, and healthcare facilities.

At the trust’s current unit price, it is trading at just 2.6% higher than its 52-week low of S$0.57. This prompted me to investigate the REIT.

Here are three things I found that can give investors an effective but quick overview of Far East Hospitality Trust:

1. Overview of the trust’s structure: far-east-hospitality-trust-structure
Source: Far East Hospitality Trust investor presentation

The chart above is a quick summary of the trust’s ownership and corporate structure.

We can see that majority of the trust’s stapled securities – over 56% – are owned by Far East Organisation, Singapore’s largest private property developer, which is also the sponsor of the trust.

From this, we can see some possible alignment of interest between Far East Organisation and minority owners of Far East Hospitality Trust – it is in the interest of Far East Organisation to see that the trust delivers a good business performance in the long run.

2. Financial performance in the first three quarters of 2016:

Source: Far East Hospitality Trust earnings presentation

Thus far in 2016, the trust has seen its gross revenue, net property income, and distribution per stapled security all fall when compared to the same period a year ago.

That could be one of the possible reasons behind the trust’s unit price being near a 52-week low.

3. Occupancy rate and average daily rate

The occupancy rate and average daily rate (ADR) are two important metrics for the trust that measures the strength of the overall market demand for its properties.

Here’s how those figures look like:

Source: Far East Hospitality Trust earnings presentation (green for hotels, orange for serviced apartments)

Turns out, in the first nine months of 2016, Far East Hospitality Trust’s hotels registered higher occupancy whilst its serviced apartments saw their occupancy rate fall. But, both the trust’s hotels and serviced apartments experienced a decline in their ADRs.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.