Far East Hospitality Trust’s (FEHT) 1Q17 results were within expectations albeit at the lower end, with revenue and DPU making up 23.7% and 23.6% of our full-year forecasts respectively. 1Q17 DPU dropped 13.9% YoY to 0.93 S cents on the back of a 9.5% YoY decline in revenue to S$24.8m. 1Q17 Hotel RevPAR declined 4.6% YoY to S$134, mainly because ADR dropped 4.7% to S$152. Hotels continue to face weak corporate demand as well as heightened competition from new supply.

1Q17 Serviced Residences (SR) RevPAU dropped 14.0% YoY to S$162, largely due to a 13.1 ppt dip in occupancy to 71.2%, which more than offset a 1.8% increase in ADR to S$227.

SR revenue from the Banking & Finance and Services segments was particularly weak in 1Q17, while the contributions from Oil & Gas and Electronics & Manufacturing showed some improvement.

Demand for the SRs picked up towards the later part of 1Q17. We keep our HOLD rating but place our fair value of S$0.60 under review pending further details from the conference call.

Source: OCBC Research - 12 May 2017