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Far East Hospitality Trust declares 43.4% decline in 1H20 DPS to 1.03 cents

Felicia Tan
Felicia Tan • 3 min read
Far East Hospitality Trust declares 43.4% decline in 1H20 DPS to 1.03 cents
Including the amount retained, DPS for FEHT would have stood at 1.29 cents, representing a 29.1% decline y-o-y.
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The manager of Far East Hospitality Trust (FEHT) has declared a distribution per unit (DPU) of 1.03 cents for 1H20 ended June, some 43.4% lower than the DPS of 1.82 cents a year ago.

Income available for distribution for 1H20 fell 26.5% y-o-y to $25.7 million. Due to the impact from the Covid-19 pandemic, the manager of FEHT has retained some $5.5 million of the income, which brings distributable income for the half-year to $20.2 million.

Including the amount retained, DPS for FEHT would have stood at 1.29 cents, representing a 29.1% decline y-o-y.

“The COVID-19 pandemic has dealt a severe blow to the hospitality industry. The impact on our hotels deepened as international travel restrictions tightened, although it was cushioned in recent months by contracts from government agencies for isolation purposes and from companies for their workers. Our serviced residences were affected to a lesser extent as they had longer leases from corporate accounts,” says Gerald Lee, CEO of the manager.

“The full impact of the adverse operating conditions is mitigated by the master leases for our hotels and serviced residences, signed with companies of the Sponsor. The fixed rent component, which formed about 72% of the master lease rental in FY2019, provides a minimum payment and a downside protection for stapled securityholders. In addition, the review of the management fee structure by the REIT Manager undertaken in end 2019 has resulted in lower management fees for the Trust with effect from this year,” he adds.

Gross revenue for 1H20 fell 20.6% y-o-y to $44.3 million due to the declined average occupancy in the hotels in FEHT’s portfolio from the pandemic. The lower revenue was mitigated by the relatively high fixed rent component of the master lease rental.

Average occupancy for FEHT’s hotels picked up when companies that required their Malaysian workers to stay in Singapore during Malaysia’s Movement Control Order (MCO). Average occupancy also rose slightly from government agencies for guests who needed to be isolated.

For 1H20, FEHT’s average occupancy stood at 77.6% for hotels, and 82.7% for serviced residences, representing a 11.1 percentage point drop, and 1.7 percentage point increase y-o-y respectively.

Average daily rate fell 34.7% and 6.6% y-o-y for hotels and serviced residences to $102 and $200 respectively.

Revenue per available room (RevPAR) fell 42.9% and 4.7% y-o-y to $79 and $166 for hotels and serviced residences respectively.

Property expenses increased 2.3% y-o-y to $5.7 million

Net property income (NPI) fell 23.1% y-o-y to $38.6 million.

As at end June, cash and cash equivalents stood at $3.4 million, a decrease from the $7.4 million logged during the same period last year.

Total debt stood at $990.8 million, of which 60.3% was secured at fixed interest rates.

The aggregate leverage was 39.2%, and the weighted average debt to maturity was 2.8 years. The average cost of debt was 2.5% per annum.

In October 2019, a two-year $100 million term loan due to mature in April 2020 was extended to a 2.5-year S$60 million term loan and five-year S$40 million term loan ahead of its maturity.

In its outlook statement, FEHT says its serviced residences, with a higher proportion of long leases, are expected to be more resilient than the hotels during the ongoing pandemic. Tenants in its commercial premises will require further support and rental rebates due to the economic slowdown and regulatory restrictions.

“With vaccine development making progress in various countries, the REIT Manager is hopeful that the hospitality sector can recover from this setback in 2021,” it adds.

Units in FEHT closed flat at 49.5 cents on Wednesday (July 29).

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