3Q23 Update – First quarterly RevPAR above pre-COVID levels
- 3Q23 gross revenue and NPI up c.42% y-o-y to S$30.2m and S$28.2m; Indicative DPS of 3.04 scts ahead of our full year estimates
- RevPAR rose 43% y-o-y to S$150 led by higher occupancy; All hotels have jumped onto the variable rent bandwagon with strong flow through to DPUs come 4Q23; RevPAR to continue growth traction in line with competitive hotel sets within the mid-tier to upscale category
- Gearing remains at a comfortable level of 33.2%; Additional incentive fee of S$18m from Central Sq divestment may come as additional capital top ups to buffer against higher interest rates.
- Maintain BUY with unchanged target price of S$0.75
9M23 indicative DPS of 3.04 scts ahead of our estimates. FEHT reported 3Q23 gross revenue of S$30.2m (+43% y-o-y) and NPI of S$28.2m (+42% y-o-y). Year-to-date distributable income stacks up to S$60.3m (+37% y-o-y), and above our full year estimates of S$69.5m. Indicative DPS for 9M23 of 3.04 scts (including 1H capital gains top up of c.S$4m) is ahead of our full year DPU estimates of 4.0 Scts. The stronger topline operating performance was led by strong performance from hotel segment income, which registered a 43% y-o-y growth, in tandem with underlying hotel RevPAR performance, which rose 44% y-o-y to S$150.
First quarterly RevPAR above pre-COVID levels. Singapore hotels continues to track recovery in line with expectations. We note that for the quarter, the higher RevPAR of S$150 (+43% y-o-y) was led by higher room occupancy of 87% (+13 ppt q-o-q) as opposed to average daily rate, which was flat q-o-q at S$173. Going forward, the ramp up of three portfolio hotels that exit government bookings since the start of the year, alongside rebranding and asset refurbishments going onstream (Vibe Hotel, Rendevzous Hotel, Oasia Downtown) from now towards year end will help support hotel segment RevPAR going into 4Q23. This quarter marks the period FEHT’s hotels has recovered above pre-COVID levels, a datapoint that we see potential for further traction led by ADR. Sector ADRs across mid-tier to upscale hotels are trending higher q-o-q in the range of S$221 to S$344 for 3Q23 where FEHT’s portfolio lies. On a 9M23 basis, approximately one-third of topline revenue is contributed by variable rent. All hotels now surpassed the variable rental income threshold, with 4Q to see a similarly strong flow through to distributable income.
Gearing stable at 33.2%. Both gearing ratio and cost of debt remained stable and flat on a q-o-q basis, landing at 33.2% and 3.20% respectively. Part of loans due for renewal in FY24 has seen early refinancing in Mar-23, with just 17% of debt to be renewed in the coming year. Average cost of debt is expected to increase to the higher 3% to 4% come FY24. FEHT will consider using part of the S$18m granted as additional incentive fee from Central Square redevelopment, which was divested early last year, as an additional stream of capital top up to buffer for impact of higher interest cost.
Average room rates across hotel tiers
| 3Q23 | 3Q22 | 2Q23 | yoy change | qoq change | |
| Economy | 156.2 | 126.2 | 141.5 | 24% | 10% |
| Mid-tier | 221.5 | 203.0 | 214.9 | 9% | 3% |
| Upscale | 344.3 | 298.9 | 326.6 | 15% | 5% |
| Luxury | 604.9 | 524.2 | 572.7 | 15% | 6% |
*Note 3Q comparisons are for the months of July-Aug
Source: Singapore Tourism Analytics Network, DBS Bank
Results Summary
| Summary of results | 3Q23 | 2Q23 | %q-o-q | 3Q22 | %y-o-y |
| Revenue (S$m) | 30.19 | 26.85 | 12% | 21.20 | 42% |
| NPI (S$m) | 28.13 | 25.30 | 11% | 19.75 | 42% |
| DI (S$m) | 22.87 | 19.18 | 19% | 15.14 | 51% |
| Key Financial Metrics | 3Q23 | 2Q23 | %q-o-q | 3Q22 | %y-o-y |
| Gearing | 32.2% | 32.0% | 0.2 ppt | 33.5% | -1.3 ppt |
| Average cost of debt | 3.20% | 3.20% | 0 ppt | 2.00% | 1.2 ppt |
| ICR (x) | 3.7 | 3.6 | 0.1 | 4 | (0.3) |
| Key Operational Data | 3Q23 | 2Q23 | %h-o-h | 3Q22 | %y-o-y |
| Hotels – Occ (%) | 86.7% | 74.7% | 12 ppt | 76.0% | 10.7 ppt |
| Hotels – ADR (S$) | 173 | 173 | 0% | 137 | 26% |
| Hotels – RevPAR (S$) | 150 | 131 | 15% | 105 | 43% |
| SR – Occ (%) | 88.7% | 89.5% | -0.8 ppt | 90.4% | -1.7 ppt |
| SR – ADR (S$) | 269 | 249 | 8% | 235 | 14% |
| SR – RevPAR (S$) | 239 | 224 | 7% | 213 | 12% |