Far East hospitality Trust (FEHT) posted a solid set of 3Q18 results. Gross Revenue increased 11.1% YoY to S$30.5m, due to an increase in hotel master lease rental and contribution from Oasia Hotel Downtown. NPI increased 11.8% YoY to S$27.7m.

Due to increased interest costs which were mainly due to the Oasia acquisition, 3Q18 DPU increased by a smaller +1.9% YoY to 1.05 S cents or 25% of our full-year forecast. 3Q18 hotel RevPAR increased 6.6% to S$152, mainly due to a 5.1% increase in ADR.

We note that this RevPAR growth figure may have been skewed by the addition of Oasia Hotel Downtown to the portfolio and the improvement in performance by the recently renovated and rebranded Orchard Rendezvous Hotel (formerly Orchard Parade Hotel). Nonetheless, management notes an uptick in overall market demand on the broader front.

Services residences RevPAU decreased 5.4% YoY to S$186. Pending today’s conference call, we maintain BUY but place our fair value of S$0.69 under review.

Source: OCBC Research - 30 Oct 2018