Low occupancy rates, massive hotel room glut to plague Far East HT in 2015

This REIT's outlook is continually weak.

Far East Hospitality Trust is in for a tough year in 2015, with its outlook clouded by low occupancy rates and a hotel room oversupply.

A report from CIMB stated that intense competition in the mid-tier hotel space along Orchard Road will keep FEHT's earnings potential weak following its uninspiring results in FY14.

"As the market continues to digest last year’s supply, and c.750 mid-tier rooms are scheduled to come online in the Orchard vicinity by 1H15, we expect FEHT’s Orchard hotels to continue facing intense competition. With c.67% of
its revenue attributable to hotels, FEHT’s outlook remains challenged. This, coupled with the lack of pricing power, has led us to lower our DPS forecast by 6.1%/6.6% in FY15/FY16 and downgrade FEHT to Reduce," CIMB stated.

FEHT reported a 3.1% decline in its hotel occupancy rate for FY14, while revenue per available room slipped 6% year-on-year.

Its net profit plunged 48.4% to $71.3m, compared to $138.2m in FY13.