CGS International
April 30, 2025
Far East Hospitality Trust Faces Mixed Outlook in 2025: In-Depth Analysis, Peer Review, and ESG Insights
Overview: FEHT’s 1Q25 Performance and Key Takeaways
Far East Hospitality Trust (FEHT), a leading Singapore REIT focused on hospitality, delivered a mixed performance in 1Q25 as it navigated sector headwinds and interest rate tailwinds. Gross revenue and net property income (NPI) came in at S$25.2 million and S$23.0 million respectively, each representing 21% of FY25 full-year forecasts. The trust reported a 6.8% year-on-year decrease in gross revenue and an 8.3% decline in NPI, mainly due to lower contributions from hotels and serviced residences, though partially offset by higher commercial premises income. Increased property taxes also weighed on NPI.
Interest expense savings provided some relief, dropping 7% year-on-year in 1Q25, as FEHT benefited from a 60-basis-point reduction in cost of debt to 3.5%. New interest rate swaps (IRS) at lower rates for S$97 million (about 13% of total borrowings) are expected to generate further savings. The trust’s management anticipates lower interest expenses going forward, driven by falling base rates and favorable IRS pricing for SGD and JPY borrowings.
As a result of weaker-than-expected operational figures, CGS International revised down FY25-27 distributable per unit (DPU) estimates by 0.1%–4.7%, with the FY25 forecast DPU now at 3.84 Singapore cents, FY26 at 3.89 cents, and FY27 at 3.94 cents. The DDM-based target price has been trimmed from S$0.75 to S$0.74.
1Q25 Operational Performance: Hotels and Serviced Residences Under Pressure
The Singapore hospitality segment faced notable pressures in the first quarter:
- Hotels: 1Q25 revenue per available room (RevPAR) fell 6% year-on-year to S\$135, driven primarily by a 4.4% decline in average daily rate (ADR).
- Serviced Residences: RevPAR dropped 6.5% year-on-year to S\$206, partly due to lower occupancy at Village Residence Robertson Quay (VRRQ) during lift replacement works and the expiry of two group bookings at Village Residence Hougang.
Despite these setbacks, management expects RevPAR and occupancy rates (above 80%) to remain stable year-on-year in 2Q25, based on forward bookings. Transient demand is likely to benefit from higher visitor arrivals during event periods, but the outlook remains cautious due to lingering supply headwinds from 2024 and potential tariff-driven reductions in discretionary corporate travel. Management also highlighted that further recovery in leisure travel demand from key source markets (currently at 80–90% of 2019 levels) could drive RevPAR higher. In response, CGS International lowered the FY25 RevPAR assumption to reflect a conservative stance.
Financials at a Glance: Key Figures and Trends
| Year |
Gross Property Revenue (S\$m) |
Net Property Income (S\$m) |
Net Profit (S\$m) |
Distributable Profit (S\$m) |
DPS (S\$) |
Dividend Yield |
Asset Leverage |
Core EPS (S\$) |
FD Core P/E (x) |
BVPS (S\$) |
P/BV (x) |
| Dec-23A |
106.8 |
98.7 |
112.4 |
81.91 |
0.041 |
7.50% |
28.1% |
0.033 |
16.59 |
0.93 |
0.58 |
| Dec-24A |
108.7 |
99.3 |
49.8 |
82.71 |
0.040 |
7.41% |
27.7% |
0.030 |
18.43 |
0.91 |
0.60 |
| Dec-25F |
111.0 |
100.6 |
64.5 |
79.02 |
0.038 |
7.05% |
30.8% |
0.031 |
17.32 |
0.90 |
0.61 |
| Dec-26F |
122.4 |
110.9 |
73.1 |
80.39 |
0.039 |
7.14% |
30.9% |
0.035 |
15.37 |
0.89 |
0.61 |
| Dec-27F |
127.7 |
114.6 |
74.5 |
81.93 |
0.039 |
7.24% |
31.3% |
0.036 |
15.16 |
0.89 |
0.61 |
Other key metrics include:
- Gearing rose to 31.2% in 1Q25, with debt headroom of approximately S\$600 million (assuming 45% gearing).
- Dividend yield for FY25F is projected at 6.9%.
- Net Property Income (NPI) margins are expected to slightly decline from 92.4% in 2023 to 89.7% in 2027.
Strategic Moves and Forward Guidance
FEHT maintains a prudent approach, leveraging a remaining S$9.7 million incentive fee from the Central Square divestment to cushion against a challenging environment. The acquisition of Four Points Nagoya was completed in April, with contributions expected from 2Q25 onwards. Management continues to favor Singapore and Japan for potential acquisitions, eyeing opportunities when transaction markets become more favorable and yield spreads are accretive.
ESG Performance: Strengths, Weaknesses, and Road Ahead
FEHT scored B- in its 2023 combined ESG assessment by LSEG, with sub-scores of C+ in Environmental, B in Social, and B in Governance. The Environmental score was dragged down by emissions and environmental innovation, despite a strong showing in resource use. Social scores were held back by human rights and product responsibility, although the community score was robust.
Key ESG highlights:
- Five out of 12 properties are certified under the Green Mark scheme by Singapore’s Building and Construction Authority.
- FEHT aims for Singapore Green Mark Gold for new Sentosa hotels and targets 2% annual reduction in average energy consumption.
- Energy consumption, carbon emissions, and water usage increased in FY23 due to higher post-pandemic utilization, but energy and emissions intensity per occupied room decreased.
- FEHT ranked 45th out of 107 Singapore companies and 15th out of 26 Singapore REITs on LSEG’s ESG assessment.
- The trust aspires to achieve net-zero emissions by 2050.
However, ESG disclosures still lag behind peers, and improved transparency could draw greater investor attention. No explicit premium or discount for ESG is factored into current valuations.
Peer Comparison: Hospitality, Industrial, Office, Retail, and Overseas-Centric REITs
Below is a comparative snapshot of major S-REITs across sectors, including market cap, leverage, price-to-NAV, and yield forecasts.
| Name |
Ticker |
Price (LC) |
Target Price |
Mkt Cap (US\$m) |
Asset Leverage |
Last Stated NAV |
P/NAV |
Dividend Yield FY25F |
Dividend Yield FY26F |
Dividend Yield FY27F |
| CapitaLand Ascott Trust |
CLAS SP |
0.86 |
1.13 |
2,493 |
39.9% |
1.15 |
0.74 |
7.1% |
7.4% |
7.4% |
| CDL Hospitality Trust |
CDREIT SP |
0.80 |
1.07 |
769 |
41.8% |
1.48 |
0.54 |
7.4% |
8.0% |
8.2% |
| Far East Hospitality Trust |
FEHT SP |
0.55 |
0.74 |
843 |
31.2% |
0.92 |
0.59 |
7.1% |
7.1% |
7.2% |
| Frasers Hospitality Trust |
FHT SP |
0.63 |
NA |
773 |
35.0% |
0.64 |
0.98 |
4.1% |
4.4% |
4.8% |
| Simple Average (Hospitality) |
6.4% |
6.7% |
6.9% |
Other sector averages:
- Industrial REITs: Average dividend yield of 5.5%–5.6%.
- Office REITs: Average dividend yield of 6.3%–6.9%.
- Retail REITs: Average dividend yield of 6.2%–6.5%.
- Overseas-centric REITs: Average dividend yield of 7.0%–19.9% (highly varied).
- Healthcare REITs: Parkway Life REIT yields 3.6%–4.1%.
Valuation, Risks, and Investment Thesis
CGS International maintains an “Add” rating on FEHT, with a revised target price of S$0.74, representing a potential upside of 35.8% from the current price of S$0.545. The forecast FY25 dividend yield stands at 6.9%, offering attractive income potential. Consensus ratings are positive, with 11 Buys, 2 Holds, and 1 Sell.
Key catalysts for a re-rating include accretive acquisitions and further interest expense savings. Downside risks revolve around a potential slowdown in global travel demand and unexpected shifts in the interest rate environment.
Key Shareholders and Analyst Coverage
Major shareholders:
- Golden Development Pte Ltd: 22.0%
- Golden Landmark Pte Ltd: 10.5%
- Far East Organization Centre Pte Ltd: 9.8%
Analyst coverage is led by LOCK Mun Yee and LI Jialin of CGS International.
Conclusion: FEHT’s Positioning in a Transitional Hospitality Market
FEHT faces a challenging operating landscape in 2025, marked by softer RevPAR, cautious demand outlook, and sector headwinds. However, proactive interest savings, prudent capital management, and a healthy acquisition pipeline underpin its resilience. The trust remains well-placed for recovery as travel continues to normalize and acquisition opportunities emerge. With a solid projected yield and strong peer positioning, FEHT continues to be a notable candidate for income-seeking investors monitoring the Singapore REIT space.
