Date of Report: September 30, 2024
Broker Name: CGS International Securities

Overview of Far East Hospitality Trust (FEHT)

Far East Hospitality Trust (FEHT) is highlighted in the report as a key player in Singapore’s hospitality sector. The trust has been able to capitalize on the increasing demand for serviced residences and hotel accommodations, driven by a strong corporate clientele. As of September 29, 2024, FEHT was trading at S$0.645 with a target price of S$0.78, and an “ADD” recommendation, indicating the expectation of a total return exceeding 10% over the next 12 months.

Financial Metrics and Valuation

• Price to Earnings (P/E) Ratio:
  • 2024F: 19.86x
  • 2025F: 18.03x
  • 2026F: 17.54x
• Price to Book Value (P/BV) Ratio:
  • 2024F: 0.70x
  • 2025F: 0.71x
  • 2026F: 0.71x
• Dividend Yield:
  • 2024F: 6.53%
  • 2025F: 6.57%
  • 2026F: 6.57%

Far East Hospitality Trust’s dividend yield is projected to remain stable at 6.53% for 2024, increasing slightly to 6.57% in both 2025 and 2026, making it attractive for income-seeking investors. The trust’s consistent earnings and stable valuation metrics highlight its financial resilience.

Corporate Demand Driving Strong Performance

FEHT has benefited significantly from robust corporate demand for serviced residences, which has pushed occupancy and revenue per available room (RevPAR) above pre-2019 levels. The demand for corporate accommodations has been a key growth driver for the trust, as businesses continue to rely on long-term stays for their employees and partners.

Revamped Hotel Offerings and Geographic Diversification

The trust has recently revamped its hotel offerings, which is expected to drive higher room rates and further support its financial performance. FEHT’s ability to revitalize its assets is seen as a key re-rating catalyst, potentially improving its market positioning and profitability.

Additionally, geographical diversification is mentioned as an important factor for the trust’s growth prospects. While FEHT’s core operations are centered in Singapore, expanding its footprint beyond the country could open new revenue streams and reduce market concentration risks.

Stable and Attractive Dividend Yield

FEHT’s consistent dividend yield, forecasted to stay around 6.5% over the next few years, adds to its attractiveness for investors focused on steady income. The trust’s ability to generate stable cash flows and maintain a high dividend payout ratio reflects its strong operational performance.

Conclusion

Far East Hospitality Trust is well-positioned to leverage strong corporate demand and its newly revamped hotel offerings to drive growth. Its consistent dividend yield, coupled with the potential for geographic diversification, makes FEHT an attractive investment in Singapore’s hospitality sector. The trust’s strategic focus on asset improvements and corporate client demand positions it favorably for continued success in the coming years.