Going from strength to strength
- Gross revenue rose 28% y-o-y to S$106.8m; FY23 DPS of 4.06 Scts (+25% y-o-y) ahead of our estimates
- Full-year variable income saw a six-fold increase y-o-y to exceed pre-COVID levels, on a 36% y-o-y increase in hotel revenue; more upside from AEI and rebranding
- Portfolio valuation up 2.6% y-o-y, mirroring peers’ performance within the SG market; capital management stable with interest rate hedge low at 42.6%
- Maintain BUY with higher TP of S$0.80
FY23 Results
- Gross revenue in 2H23 rose 28.6% y-o-y to S$54.8m
- Full-year gross revenue and NPI rose 27.8% y-o-y to S$106.8m and 27.7% y-o-y to S$98.7m, respectively
- A strong rebound was seen in revenue of the hotel segment, which rose 36% y-o-y, and, to a smaller extent, the serviced residences (SR, 7.9% y-o-y) and commercial segments (9.2% y-o-y)
- Variable income from both the hotel and SR segments rose c.6x y-o-y to S$17.1m and were above FY19 levels
- As such, full-year DPS rose 25.1% y-o-y to 4.09 Scts, including S$8.2m in divestment gain proceeds from Central Square
- Hotel segment saw a recovery in both corporate and leisure bookings; RevPAR rose 48% y-o-y to S$136
- Hotel segment occupancy rose 6.3ppt y-o-y to 80.1%, while ADR rose 36.1% y-o-y to S$170
- SR segment RevPAR rose 14.7% y-o-y to S$229 (same-store basis excluding Central Square divestment), a new high since the IPO
- SR occupancy was flat at 88%, with most of the upside from higher room rate pricing, which rose 15.3% y-o-y to S$260
- Capital management: Aggregate leverage remains healthy at 31.3%, with average cost of debt of 3.3%; interest coverage ratio was 3.5x
- Proportion of fixed IR hedge has reduced to 42.6% as at 31 Dec 2023 (from 54% as at 4Q22) and stands as one of the lowest within the sector
Maintain BUY with higher TP of S$0.80. We roll forward our estimates into FY24. We are maintaining our interest cost of 3.75% for the full year of 2024 and pricing in stronger occupancy estimates of 84% for FEHT’s hotel segment in FY24 (pre-COVID occupancy at c.88%). Management shared that the additional incentive fee of c.S$18m from the Central Square divestment could be used to shield from higher interest cost in the coming years as a result of capital top-ups, which we have not factored into our estimates. This would be in addition to the guided three-year divestment gain top-up of S$24m over three years, which we have priced in.
