• 4Q15 DPU slipped 8.6% YoY
• RevPARs and RevPAUs remained weak
• Lower FV but maintain HOLD

4Q15 results soft, but in-line with expectations

Far East Hospitality Trust (FEHT) reported a lacklustre set of 4Q15 results, but was within our expectations. Gross revenue fell 4.7% YoY to S$28.9m, while DPU dipped 8.6% to 1.17 S cents. For FY15, FEHT’s gross revenue decreased by 5.8% to S$114.6m, and formed 96.7% of our full-year projection. DPU of 4.60 S cents represented a fall of 10.5%, but was just 1% lower than our forecast.

Room rates the main drag

FEHT’s operational performance was impacted by the uncertain macroeconomic environment, which dampened demand for corporate travel. The situation was exacerbated by the estimated addition of 4,266 hotel rooms (+7.5%) to the market in 2015. The rout in oil prices also contributed negatively to the take-up of Serviced Residences (SR) units by Oil & Gas project groups. RevPAR for FEHT’s Hotels portfolio declined 4.4% YoY to S$146 in 4Q15.

Although occupancy rose 2.9 ppt YoY to 85.3%, this was offset by the 7.6% fall in average daily rate (ADR) to S$171. Similarly for its SR portfolio, while occupancy was fairly resilient (-0.6 ppt YoY to 82.6%), ADR slumped 12.8% and culminated in a 13.5% drop in RevPAU to S$180. For FY15, RevPAR and RevPAU for FEHT’s Hotels and SR segments declined 5.8% and 8.8% to S$146 and S$200, respectively.

Outlook expected to remain challenging

Looking ahead, FEHT believes corporate travel may remain soft given the vagaries in the global economic landscape. Although 2016 will see the return of biennial events to Singapore such as the Singapore Airshow and new events such as the HSBC World Rugby Sevens Series, the pressure on industry room rates would likely persist, in our view, given competition from the upcoming hotels supply this year.

We lower our FY16 DPU forecast by 5% on weaker RevPAR/RevPAU assumptions, and consequently reduce our fair value estimate from S$0.67 to S$0.64. Maintain HOLD.

Source: OCBC Research - 25 Feb 2016