Far East Hospitality could speed up recovery through acquisitions

Its purchase of Oasia Downtown fueled its NPI growth of 11.2% to $25.74m in Q2.

Far East Hospitality (FEHT) could bolster recovery through new acquisitions, DBS Equity Research said.

DBS mentioned that FEHT recently bought Oasia Downtown and it is still engaged with its sponsor regarding potential acquisitions.

The firm acknowledged that risks can spurt amidst the reduction of minimum stay in its serviced residences from six months to three months. Similarly, the company’s serviced residence portfolio continued to witness weak demand with average daily rate (ADR) falling to 4.5% to $168 in Q2.

“In our view, this risk has been priced in given that FEHT already trades at a significant discount to book value and the serviced residences only represent 10% to 12% of revenue,” DBS noted.

Also read: Far East Hospitality Trust Q2 NPI up 11.2% to $25.74m

DBS also mentioned that the firm can expect recovery from its Singapore hotel portfolio which saw a 5% YoY growth in revenue per available room (RevPAR) for H1 2018.

“Post this quarter’s results, we believe FEHT still has room to post positive RevPAR growth against its low base last year,” OCBC Investment Research commented.

FEHT’s net property income (NPI) rose 11.2% to $25.74m in Q2, on the back of the addition of Oasia Hotel Downtown to its portfolio.