Far East Hospitality Trust: Capitalizing on Singapore’s Tourism Recovery

BUY Rating Maintained: Target Price at S$0.76

• Share Price: S$0.60
• Target Price: S$0.76
• Upside Potential: +27.6%
• Previous Target Price: S$0.82

Company Overview

Far East Hospitality Trust (FEHT) is a Singapore-based hospitality trust that owns and manages a portfolio of 12 hospitality properties, including nine hotels and three serviced residences, amounting to 3,015 rooms.

• Market Cap: S$1.2 billion
• Major Shareholders:
  • Golden Development – 22.4%
  • Far East Organization – 16.7%
  • Golden Landmark – 10.3%

2H24 Performance: Recovery on Track

The second half of 2024 (2H24) demonstrated continued improvement, driven by strong tourism recovery and higher revenue per available room (RevPAR).

• Hotels’ RevPAR grew by 7.7% YoY to S$140 in 4Q24, supported by higher average daily rates (ADR) of S$180.
• Revenue from commercial premises increased by 4.8% YoY due to higher rents and occupancy rates.
• Visitor arrivals to Singapore are expected to grow by 3-12% in 2025, reaching 17.0m-18.5m, backed by new attractions and MICE (Meetings, Incentives, Conferences, and Exhibitions) events.
• Aggregate leverage remains low at 30.8%, providing flexibility for future acquisitions.

Key Financials (S$ million)

Stock Catalysts

1. Benefiting from Singapore’s Tourism Rebound

• The Singapore Tourism Board (STB) projects visitor arrivals to rise by 3-12% in 2025 to 17.0m-18.5m (from 16.5m in 2024).
• Major attractions opening in 2025 include:
  • Rainforest Wild in March 2025.
  • Minion Land at Universal Studios and Singapore Oceanarium in 1H25.
• FEHT’s upscale and mid-tier hotels gained from the return of Chinese tourists, who accounted for 19% of total hotel guests in 2024 (double pre-pandemic levels).

2. Strategic Acquisitions in Sight

• FEHT has S$412 million in debt headroom, allowing it to explore acquisitions both locally and overseas.
• Potential purchases from its sponsor, Far East Organization (FEO), include:
  • The Clan Hotel
  • Village Residence West Coast
  • Remaining 70% stake in Village Hotel, Outpost Hotel, and The Barracks on Sentosa.
• Overseas expansion focus: limited-service, midscale, and upscale hotels in developed markets, including Japan.

3. Strengthening Financial Position

• Debt maturity profile is well-managed, with 57.9% of borrowings fixed at stable rates.
• Weighted average debt maturity has improved to 3.7 years, reducing refinancing risks.
• Capital distributions in 2025 are expected to decrease to S$7 million (from S$16 million in 2024), allowing more capital for yield-accretive acquisitions.

4. Attractive Yield & Strong Valuation

• FEHT offers a 6.4% distribution yield for 2025, which is attractive compared to peers.
• The stock trades at 0.7x P/B, below its net asset value (NAV) per share of S$0.91.
• Target Price of S$0.76 is based on Discounted Dividend Model (DDM), with a 7.5% cost of equity and 2.8% terminal growth rate.

Investment Recommendation: Maintain BUY

• FEHT is well-positioned to capitalize on Singapore’s tourism resurgence, with strategic acquisitions and a robust balance sheet.
• The upcoming openings of major attractions and MICE events will drive higher occupancy rates and RevPAR.
• Current valuation remains attractive, with upside potential of +27.6%.

📌 BUY with a Target Price of S$0.76.

Thank you