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Far East Hospitality Trust - Is The 5.7% Yield Sustainable?

Key Highlights:

  • Far East Hospitality Trust (SGX: Q5T)'s 3Q19 DPU dropped 1%

  • The annualised yield and price to book ratio are 5.7% and 0.81 respectively

1. Dividends

The drop in DPU was mainly due to the enlarged unit base of 2.8% from its dividend reinvestment plan in the past three quarters. Net property income grew 1.3% to $28.1m, contributed by the master lease rental from hotels and serviced apartments.

The annualised yield is 5.7%. The REIT has not been performing over the years. Both the price and DPUs of the REIT has been in the downtrend.

Source: reitscompass's REITs Insider ratings

2. Portfolio

Portfolio occupancy remains at 88.2%. The portfolio leverage is currently at 39.6%. The interest cost is 2.9%. Good news is the REIT will not have any term loan to refinance next year.

It is currently trading at a price to book ratio of 0.81.

3. Growth Catalyst

Moving forward, with the slow down in economic growth, the demand for accommodation from the corporate segment is expected to remain weak. The Singapore government is implementing measures to drive demand, particularly building the exhibition and conference pipelines.

The tourist segment is expected to grow. With the riots in Hong Kong, we would see more tourists pick Singapore as the holidays' destination.


As mentioned previously, we are bearish on hospitality REITs.

We have launched a new feature for the premium subscribers - REITs Numerical Scoring (R.N.S.), which we use as the core strategy to select REITs with good fundamentals.

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