Far East Hospitality Trust DPU fell 36.7% YoY in 2020

OCBC Investment Research gave the trust a 'buy' recommendation.

Far East Hospitality Trust (FEHT) has recorded a distribution per unit (DPU) of 2.41 Singapore cents in 2020, 36.7% down YoY from the previous year’s 3.81 Singapore cents, the company has announced.

Total distributable income during the year fell 35.2% YoY to $47.9m from $73.9m in 2019.

Gross revenue dropped 34.8% YoY to $39m, whilst net property income slipped 38% to $33.6m for H2 FY2020 due to lower master lease rental income and rental rebates given to commercial tenants.

DPU over the same period declined 30.7% YoY to 1.38 Singapore cents.

OCBC Investment Research (OIR) analyst Chu Peng mentioned that SRs continued to perform better overall than hotels and above fixed rent.

“We expect hotels to remain on fixed rent in 1H21 but could see more income visibility in 2H21 with the rollout of vaccines,” Chu said.

She added that FEHT’s average daily rates are likely to have bottomed out in FY2020, but occupancy could be under pressure as the isolation business tapers off and competition intensifies for corporate businesses.

“However, FEHT’s fixed rent component which formed about 77% of gross revenue in FY2020 could continue to provide some buffer and downside protection,” Chu said.

OIR gave FEHT a “buy” recommendation with the fair value estimate remaining at $0.66.