Far East Hospitality Trust (SGX: Q5T), or FEHT, is a real estate investment trust (REIT) that focuses primarily in hospitality and hospitality related properties.
The trust has 12 properties, comprising eight hotels and four serviced residences, strategically located within close proximity to business districts, leisure attractions, and healthcare facilities.
There are two things about the REIT that investors may want to know about right now: its latest financial performance and valuation.
Here’s a table showing important items from FEHT’s financial performance for the third quarter of financial year ending December 2017 (FY2017).
Source: FEHT’s 2017 third quarter result press release
Overall, we see that all metrics were lagging those of the same period in FY2016.
In its hotel business, the average occupancy increased 1% to 89.4% and the average daily rate (ADR) decreased 0.7% to $159 as compared to the third quarter of 2016.
On the other hand, its service apartment business saw average occupancy decrease 1% to 89% and ADR was 2.3% lower at $221, as compared to the same quarter last year.
Mr Gerald Lee, Chief Executive Officer of the REIT Manager provided the following comments:
“While the rest of the year is likely to remain challenging due to the increased hotel supply coupled with a continuing soft corporate demand, we expect the situation to improve in the near future. We will continue with our asset enhancement initiatives and to drive the performance of our portfolio through accretive investments.”
In sum, investors can expect the REIT to continue facing challenges for the remaining of 2017, but the situation is expected to improve in the future.
There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.
The table below shows FEHT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 40 REITs that are in Singapore’s stock market.
Source: SGX Stock Facts and Google Finance (data as of 4 December 2017)
We can see that FEHT is trading at a discount to market average based on its PB value, but its yield is lower than average.
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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.