Far East Orchard Limited Reports Strong Profit Boosted by Strategic Acquisitions and One-off Gains

Key Highlights of the 9M FY2025 Business Update

• Net Profit Surges: Far East Orchard Limited (“Far East Orchard” or “the Group”) reported a profit after tax of S\$37.2 million for the nine months ended 30 September 2025, more than doubling year-on-year. This was primarily driven by one-off gains totaling S\$24.9 million arising from strategic acquisitions.
• Homes for Students (HFS) Acquisition: The Group completed the second phase of its acquisition of Homes for Students (“HFS”) on 30 September 2025, increasing its stake to 84% and making HFS a subsidiary. This move significantly expands Far East Orchard’s exposure to the UK’s Purpose-Built Student Accommodation (PBSA) sector.
• One-off Gains: The profit includes a S\$9.1 million gain from acquiring an additional 6.7% in Woodlands Square Pte. Ltd. (“Woods Square”), and a S\$15.8 million re-measurement gain on the previously held 49% interest in HFS.
• Revenue and Operating Profit: Revenue declined 4.2% year-on-year to S\$134.2 million, while operating profit fell 8.9% to S\$42.9 million, impacted by weaker hospitality segment performance.

Price Sensitive Developments for Shareholders

• HFS Becomes Subsidiary: The ramp-up of HFS to subsidiary status means Far East Orchard now consolidates the results of a platform managing over 55,000 beds across the UK and Ireland. This scale supports occupancy rates and operational resilience in the student accommodation sector.
• Legal Liability and Court Judgement: In September 2025, a court judgement was issued against Toga Hotel Holdings Unit Trust (“Toga Trust”), a joint venture subsidiary, related to alleged underpayment of rent, wrongful termination, and repudiation of a lease. Previously, no provision was made as legal advice indicated low probability of material liability; the court judgement may now have financial implications.
• Hospitality Segment Challenges: The hospitality segment saw lower contributions, mainly due to ongoing refurbishment works at Rendezvous Hotel Perth Scarborough (Australia), weaker European performance, and the impact of a cyber incident in March 2025. Business interruption insurance mitigated some losses, but a one-off liability was recognized in the Australian joint venture this quarter.
• Refurbishments and Closures: Major refurbishments are underway at key assets:
  • Rendezvous Hotel Perth Scarborough (337-room): Multi-year refurbishment ongoing through 2028, with operational disruptions expected.
  • Adina Apartment Hotel Sydney Darling Harbour (114-room): Closed for renovation since October 2025, reopening projected for mid-2026.
• PBSA Portfolio Performance: The Group’s 100%-owned PBSA portfolio (13 assets, 3,700 beds) achieved an occupancy rate of 88.4% for Academic Year 2025/26, slightly down from 92% the previous year. HFS contributed positively, offsetting some operating cost increases.
• Fund Management: The Group’s private fund, FE UK Student Accommodation Development Fund (“FESAD”), is progressing on two new development projects (Glasgow and Manchester), adding to future growth prospects.
• Property Development Strength: Increased shareholding in Woods Square from 33% to 40% led to higher profit contributions.

Operational and Market Outlook

• Uncertain Macro Environment: The IMF projects global growth of 3.2% in 2025, but risks remain uneven and inflation varies by country. Far East Orchard anticipates challenging conditions and is actively monitoring developments.
• Hospitality Market Trends:
  • Singapore visitor arrivals (Jan–Sep 2025) reached 12.9 million, down 1.3%, below the 17–18.5 million target.
  • Australia’s hospitality market supported by major sporting events but recovery is uneven across cities.
  • Japan’s tourism growth has moderated after a record-breaking pace.
• UK PBSA Sector: UCAS data shows rising undergraduate acceptances at higher-ranked universities (+8.1%) and non-EU student numbers (+12.9%), while lower-ranked universities are experiencing declines. Rental growth is expected to remain modest, at 2–3% for the year.

Strategic Commentary

Group CEO Alan Tang emphasized that the HFS acquisition “marks another key milestone in strengthening our lodging platform and expanding our UK operations.” Despite headwinds from refurbishments and external events, the Group remains focused on building resilience and long-term value through disciplined capital management, asset enhancement, and operational excellence.

Company Background and Growth Platform

• Far East Orchard is a Singapore-listed real estate company with diversified interests in residential, commercial, hospitality, and PBSA sectors across Singapore, Australia, Japan, Malaysia, and the UK.
• Its hospitality arm (Far East Hospitality and Toga Far East Hotels) manages over 100 properties and 17,500 rooms across 10 brands and multiple countries.
• The PBSA portfolio currently comprises over 3,700 beds with three developments underway. With the latest HFS acquisition, the Group now owns and manages more than 55,000 beds in the UK and Ireland.
• Far East Orchard also owns medical suites for lease and sale in Singapore’s Novena medical hub.

Investor Takeaways

• The substantial profit after tax in 9M FY2025 is driven by non-recurring gains; underlying operating profit remains challenged by hospitality headwinds and increased PBSA costs.
• Shareholders should closely monitor the financial impact of the legal judgement against Toga Trust, ongoing asset refurbishments, and the integration and performance of HFS as a subsidiary.
• The Group’s strategic expansion in the UK PBSA sector, combined with disciplined asset management, positions it for long-term growth, but near-term volatility may persist due to market and operational disruptions.

Disclaimer: This article is for information purposes only and does not constitute investment advice. Investors should consult their financial advisers and conduct their own due diligence before making any investment decisions. The information herein is based on unaudited financials and may be subject to change.

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