Far East Hospitality Trust (FEHT) reported its 3Q14 results this morning which fell short of ours and the street’s expectations. DPU dipped 6.4% YoY to 1.32 S cents on the back of a 1.0% decline in revenue to S$31.1m. This was attributed to the weaker performance in its hotel portfolio as the average daily rate slipped 4.8% YoY to S$183, although occupancy inched up by 0.8 ppt to 87.1%. For 9M14, revenue rose 2.8% to S$91.4m and formed 69.9% of our FY14 forecast, while DPU of 3.86 S cents (-8.5%) constituted 68.4% of our full-year projection.

Looking ahead, the lacklustre international visitor arrivals and expected increase in supply of new rooms coming into the Singapore market in 2015 could pose headwinds to FEHT’s prospects. We will provide more details after the analyst conference call. In the meantime, our Hold rating and S$0.90 fair value estimate is under review.

Source: OCBC Research - 7 Nov 2014