Far East Hospitality Trust's Riverside Village Residences (Photo: REITsWeek)

Far East Hospitality Trust may have missed its DPU forecast for 1Q 2017 by 14% but there are enough positive signs on the horizon to warrant a ‘Buy’ rating on the counter, according to a research note issued by DBS.

The hospitality trust reported on 12 May that it has achieved a DPU of 0.93 Singapore cents for the quarter ended 31 March 2017, 13.9% lower from the 1.08 cents reported for 1Q 2016.

This was after gross revenue and net property income slid by 9.5% and 10.4% to SGD24.7 million (USD17.6 million) and SGD22.1 million respectively.

In a statement on the results then, Far East Hospitality attributed the numbers to an exceptionally weak market demand at the start of 2017, and softness in the corporate segment which impacted earnings at its hotels and serviced residences.

However despite the less-than-optimistic statements from the trust, DBS has upgraded the counter from ‘Hold’ to ‘Buy’ and revised its target price upwards, with the belief that the first half of 2017 will mark the cyclical low in Far East Hospitality Trust’s earnings.

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By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.