<Results Analysis> 3Q21 in line with expectations; Stock continues to trade at a deep discount to peers

  • 3Q21 normalised earnings are in line with our expectations
  • Hospitality segment continues to be impacted by COVID-19
  • PBSA segment remains resilient with occupancies above 80%
  • FEOR continues to trade at a deep discount to its peers
  • Maintain BUY with an unchanged TP of S$1.70
Advertisements

Financial Results

S$’m9M219M20% Change
Revenue75.484.0-10.2%
Loss after income tax(20.8)(13.2)-57.6%
Loss attributable to equity holders of the Company(12.6)(6.3)-100.0%
FX gain/(loss)(5.0)5.9 
Normalised earnings(15.8)(19.1)-17.2%

Key Operational Updates:

  • Hospitality business segment, particularly in Australia, continued to weigh down on FEOR’s performance amidst the ongoing lockdowns and tightened restrictions.
  • Operating profit from its PBSA business segment, rental income from medical suites, businesses from government isolation as well as various support from government grants helped to cushion losses.
  • Far East Hospitality, its hospitality arm, opened its fourth hotel, a 191-key, Oasia Resort Sentosa in 3Q21.
  • PBSA portfolio occupancy in the UK maintained above 80%.
Advertisements

Our Thoughts

3Q21 normalised earnings are in line with our expectations. The PBSA segment continues to be resilient, supporting the weakness in the Hospitality segment as COVID-19 continues to plague the sector. As Australia, one of its key markets, ramps up its vaccination efforts (currently at 67%), and more countries open their international borders, we can expect a gradual but slow recovery in its Hospitality segment. Our numbers expect normalisation in 2024. Meanwhile, its PBSA segment will continue to be the main driver of its earnings. 

We continue to see deep value in Far East Orchard as it trades at 0.41x P/B, which is at a 51% discount to its hospitality pure-play peer-average of 0.85x. As FEOR continues to grow its recurring income-focused businesses (Hospitality and PBSA), we believe that earnings stability should lead to a higher re-rating of the stock.

FEOR is trading at a deep discount to its peers

 P/BDiscount to Peers
FEOR0.41x 
Hospitality Pure-Play0.85x51.2%
PBSA0.70x40.6%

Maintain BUY with an unchanged TP of S$1.70.