Far East Hospitality Trust’s (FEHT) 3Q20 gross revenue declined 33.2% YoY to S$20.6m while NPI fell 36.4% YoY to S$17.9m, dragged by weaker performances across its segments. In terms of RevPAR, hotels RevPAR fell 55.8% YoY while SRs RevPAU declined 20.1% YoY. Overall, SRs continued to perform better than hotels, helped by SRs’ long-stay leases from corporate business.

Occupancy continued to be supported by government contracts in 3Q. However, we expect the demand from the “isolation business” and MCO to taper off in 4Q as the infection rate in Singapore comes down.

While FEHT is tapping on opportunities relating to staycation, we believe that competition is intense and the staycation business is unlikely to compensate for the income shortfall from international tourists.

After adjustments, our fair value estimate increases from S$0.51 to S$0.58. HOLD.

Source: OCBC Research - 3 Nov 2020