SINGAPORE (Nov 2): Far East Hospitality Trust (FEHT) announced that 3Q17 DPS dropped 8% to 1.03 cents compared to 1.12 cents in 3Q16.

Gross revenue for the third quarter ended September declined 2% to $27.5 million from $28.0 million a year ago, due to lower master lease rental from the hotels and serviced residences as well as softer performance in retail and office spaces.

Demand for hotel accommodation was stronger in 3Q17 compared to 2Q17, as a result of better contribution from the corporate segment. The hotel portfolio closed the gap in the average daily rate (ADR) and increased overall occupancy by 1.0pp as compared to 3Q16.

Correspondingly, revenue per available room (RevPAR) for the hotel portfolio increased 0.4% to $143.

The serviced residences portfolio continued to be impacted by downward pressure on ADR.

However, the occupancy gap that impacted trading in the first two quarters was closed in 3Q17, while average occupancy and ADR were 1.0pp and 2.3% lower y-o-y respectively. As a result, its serviced residences portfolio’s revenue per available unit (RevPAU) declined 3.4% y-o-y to $196.

Meanwhile, lower occupancy and marginal decrease in rental rates caused revenue from retail and office spaces to decline 4.5% y-o-y to $5.6 million.

Property expenses saw a 0.7% decrease to $2.69 million from $2.67 million last year.

Hence, net property income (NPI) for 3Q17 stood at $24.8 million, 2.3% lower than $25.3 million reported the previous year.

As at Sept 30, cash and cash equivalents stood at $2.86 million.

Gerald Lee, CEO of the REIT manager said, “While the rest of the year is likely to remain challenging due to the increased hotel supply coupled with a continuing soft corporate demand, we expect the situation to improve in the near future. We will continue with our asset enhancement initiatives and to drive the performance of our portfolio through accretive investments.”

Following the announcement of the results, OCBC maintains its "buy" call on FEHT with a target price of 66 cents. 

The trust's DPU dropped 8.0% y-o-y or 26.1% of the research house's full year forecast, which were within expectations. 

In a Thursday report, analyst Deborah Ong says, "9M17 DPU made up 74.3% of our full-year forecast."

As at 11.25am, units in FEHT are trading at 72 cents.