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Far East Hospitality Trust posts 6.8% higher DPS of 1.1 cents for 1H21, despite gross revenue and NPI decline

Atiqah Mokhtar
Atiqah Mokhtar7/30/2021 07:52 AM GMT+08  • 3 min read
Far East Hospitality Trust posts 6.8% higher DPS of 1.1 cents for 1H21, despite gross revenue and NPI decline
FEHT has retained $3.5 mil in 1H21 due to Covid-19 uncertainties, lower than the $5.3 mil retained the year before.
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Far East Hospitality Trust (FEHT) has reported a distribution per stapled security (DPS) of 1.1 cents for the 1HFY2021, 6.8% higher than 1.03 cents the previous year, despite lower gross revenue and net property income (NPI).

FEHT's gross revenue for the 1HFY2021 totalled $41.6 million, a 6.1% y-o-y decline from $44.3 million, primarily driven by a 23.2% drop in revenue from FEHT’s commercial premises due to rental rebates and weaker demand.

This resulted in a net property income (NPI) decline of 6.2% y-o-y to $36.2 million for the period.

Given the lower NPI, income available for distribution also declined but at a smaller pace as it was partially offset by lower finance expenses and REIT manager fees. Income available for distribution amounted to $25.3 million for the 1HFY2021, a 1.4% y-o-y decline from $25.7 million.

See also: Far East Hospitality Trust reports 8.4% y-o-y dip in NPI in 1Q21 business update

From that amount, FEHT has retained $3.5 million of taxable income for the 1HFY2021 for potential required assistance to tenants in the months ahead due to Covid-19 uncertainties.

To that end, income available for distribution after retention came in at $21.7 million. This is an increase of 7.6% y-o-y from 1HFY2020’s $20.2 million, in which $5.3 million had been retained.

For FEHT’s hotels, average occupancy and gross revenue remained flat y-o-y at 77.6% and $28.5 million respectively in 1HFY2021 on the back of bookings from companies for worker accommodation and from the government for isolation purposes.

However, lower rates from the bookings resulted in a decline in the average daily rate (ADR) and revenue per average room by 35.3% to $66 and 35.4% to $51 respectively.

For FEHT’s serviced residences, occupancy fell to 76.2% from 82.7% in 1HFY2020. ADR declined 9.5% to $181 due to lower rates on corporate contracts, resulting in a RevPAU decline of 6.9% y-o-y to $138, although the master lease rental of the SR portfolio registered a smaller decline of 7.8%. The serviced residences continued to perform above the fixed rent level.

For FEHT’s commercial premises, revenue from the retail and office spaces decreased by 23.2% y-o-y to $7.4 million in 1HFY2021, which the manager attributes to reduced demand during the pandemic as the properties are used primarily for hospitality purposes.

"Given the constraints caused by the Covid-19 pandemic, we continued to lean on alternative sources of demand and manage our costs, allowing us to deliver an 6.8% increase in distribution for 1H2021 after retention," says Gerald Lee, CEO of FEHT's manager.

“The gross revenue for our trust is protected by the fixed rent component of the master leases, which formed about 81% of gross revenue for 1H2021,” Lee adds.

In terms of outlook, the manager expects the trust to continue being supported by government and long-stay corporate contracts given the ongoing border closures.

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Nonetheless, the manager says it is closely monitoring the progress of Singapore’s reopening plans as well as reviewing its business strategy in light of the evolving COVID-19 situation.

During this period, asset enhancements will be expedited to prepare for the eventual upturn in the sector. The manager says it will also continue exploring redevelopment opportunities for the trust’s properties.

Units in FEHT closed flat at 58 cents on July 29.

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