Is Far East Hospitality Trust A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Far East Hospitality Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To March 25

Business Description

Far East Hospitality Trust is a hospitality REIT listed in 2012 and owns hospitality properties across Singapore.

What I Like About Far East HT:

The management has done an excellent job in their capital management, and the REIT has an exceptionally healthy balance sheet (Figures 4, 5 and 6)

What I Do Not Like About

Their sponsor, while notable, pales in comparison to other major REITs, which may limit their future acquisition pipelines. As of 2025, the sponsor has 7 properties within the acquisition pipeline, which the manager can explore in the future.
Since 2022, a good percentage of the reported DPU has been supported by non-operating items such as management fees paid in units and divestment gains. As of FY2024, around 27% of the dividend is contributed by such items. (Figure 7)

Updates From Recent Performance (FY 2024)

General Comments:

Investment mandates have expanded to allow the REIT to acquire foreign assets of which the Trust have entered into a purchase agreement to acquire a hotel in Japan, which is expected to be completed in April 2025.
The DPU from operations have declined by 6.4% at the back of higher financing cost. The cost of debt has increased by 0.8% year over year to 4.10%.
The REIT managers have also opted to receive a higher proportion of their fees in cash instead of units. As of FY2024, 60% of the fees are paid in units (previously was 90%).
The occupancy for retail units has improved, and office spaces remained well-leased.
The cost of borrowing is expected to remain relatively unchanged with no refinancing requirements in 2025. (Figure 6)

Positive Headwinds:

The Singapore Tourism Board has forecasted higher international visit arrivals with new attractions in Sentosa and Mandai Wildlife expected to open in the first half of 2025.

Negative Headwinds:

Increasing global economic uncertainty and headwinds might dampen demand for leisure and corporate travel as businesses and consumers tighten their wallets. This may result in lower occupancy for the hospitality sector, which may lower gross rental income.

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