Far East Orchard Limited: 1H 2025 Financial Analysis

Far East Orchard Limited (“FEOR”) has released its unaudited condensed interim financial statements for the six months ended 30 June 2025. The report gives investors a comprehensive view of the company’s latest operational and financial position, offering insight into its hospitality, purpose-built student accommodation (PBSA), and property segments.

Key Financial Metrics and Performance Table

*2H 2024 is inferred from annual figures minus 1H 2024, for indicative comparison only.

Financial Highlights

• Revenue: Declined by 6.1% YoY to \$91.3 million, primarily due to weaker performance from owned hotels in Australia (affected by ongoing refurbishment and a recent divestment) and leased properties in Singapore (impacted by nearby construction). This was partially offset by improvements in Japan and PBSA rental growth in the UK.
• Gross Profit: Marginal decrease of 2.2% YoY to \$50.3 million, reflecting lower top-line performance in hospitality.
• Net Profit: Down 8.3% YoY to \$18.0 million. Despite a large one-off gain from a joint venture acquisition, higher finance costs and lower hospitality earnings led to the decrease.
• EPS: Increased 7.2% YoY to 4.01 cents, benefiting from a higher share of profits attributable to equity holders and a reduction in outstanding shares due to scrip dividends.
• Dividends: No interim dividend was declared. A final and special dividend totaling 5 cents per share was paid in July 2025 for FY2024, up from 4 cents the previous year.
• Net Asset Value (NAV): NAV per share remained stable at \$2.83.

Exceptional Items and Non-Recurring Events

• One-off Gain: FEOR recognized a \$9.1 million gain from acquiring an additional 6.7% stake in Woodlands Square Pte. Ltd. at a price below fair value, which was reclassified from a joint venture to an associate.
• Legal Matters: The Group’s joint venture (Far East Opus Pte. Ltd.) is contesting claims from SBF Center unit owners. The company believes the claims lack merit and no provision has been made.
• Cyber Incident: A cybersecurity incident in March 2025 affected hospitality joint ventures, contributing to a swing from profit to loss in joint ventures’ share of results.
• Refurbishment Disruption: The major refurbishment of the Rendezvous Hotel Perth Scarborough (started Oct 2024, completion 2H 2028) continues to disrupt Australian hotel operations.

Segment and Geographic Performance

• Hospitality: Revenue was pressured by renovations and construction disruption in key properties. Australia and Singapore saw the largest YoY declines.
• PBSA (UK): Rental growth offset lower occupancy (92% vs. 99% prior year), with strong underlying demand but slower bookings for the upcoming academic year.
• Geographic Revenue Split (1H 2025):
  • Singapore: \$32.3m
  • Australia: \$20.8m
  • UK: \$31.4m
  • Japan: \$4.7m
  • Other: \$2.2m

Cash Flow and Balance Sheet

• Operating Cash Flow: \$17.2 million (up from \$14.3 million YoY).
• Investing Cash Flow: Outflow of \$29.7 million driven by new investments in student accommodation and property joint ventures.
• Financing Cash Flow: Outflow of \$17.9 million, including repayment of advances to non-controlling interests and increased interest payments.
• Total Assets: \$2,673.1 million (up \$31.7 million from Dec 2024), driven by new investments and favorable FX.
• Total Liabilities: \$1,283.5 million (up \$38.2 million from Dec 2024), reflecting dividend accruals and new borrowings for capital investments.

Related-Party Transactions and Unusual Fund Flows

• Related-Party Transactions: Hospitality management, rental, and acquisition transactions with associates of controlling shareholders totaled several million dollars, including a \$25 million acquisition from Far East Civil Engineering (Pte.) Limited.
• Scrip Dividend: In July 2025, 1,840,557 new shares were issued under the Scrip Dividend Scheme for the FY2024 final/special dividend.

Macroeconomic and Industry Trends

• Macroeconomic Environment: Persistent global uncertainties, inflation, and geopolitical risks continue to weigh on economic sentiment.
• Hospitality Outlook: Singapore and Australia face softening demand and rising costs; Japan remains resilient.
• PBSA Outlook: UK student accommodation demand remains strong, but supply is constrained. Bookings for AY25/26 are trending lower at 74% (vs. 92% for AY24/25), reflecting a slower pace of reservations market-wide.

Conclusion: Outlook and Investment Perspective

Despite a challenging operating environment, Far East Orchard Limited has demonstrated resilience through its diversified lodging platform and recurring income streams. Nevertheless, the company faces pressures from renovation disruptions, lower hotel occupancies, and rising finance costs. The PBSA business provides a bright spot, with rental growth offsetting occupancy declines.

The overall financial performance in 1H 2025 appears neutral to mildly weak: revenue and profit are down YoY, but the balance sheet remains strong, and the company continues to invest for growth. One-off gains and foreign exchange effects have cushioned headline profit, but underlying operational challenges persist, especially in the hospitality segment. The outlook is cautious, with management highlighting ongoing macroeconomic headwinds and operational disruptions expected to continue into 2028 for key assets.

Investors should watch for further updates on hospitality recovery post-renovation, PBSA booking trends for the new academic year, and resolution of legal and cybersecurity matters.

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