Saturday, August 18, 2012

Far East Hospitality Trust prices IPO at 93 cents per stapled security

SINGAPORE : Far East Organization has priced its hospitality trust listing at 93 Singapore cents per stapled security, the top end of its indicative price range.

The public offer opens at 9am on Friday, and the trust manager said it believes the timing of the listing is right. 

Targeting to raise about S$1.49 billion, Far East Hospitality Trust is the largest initial public offering (IPO) in Singapore this year.

The trust's portfolio consists of seven hotels and four serviced residences in Singapore and is valued at over S$2 billion.

Gerald Lee, chief executive officer of FEO Hospitality Asset Management, said: "We continue to see a lot of emphasis by the government to create new hotel rooms in the city to cater to growing demand. 

"Far East wants to participate actively in these land tenders by having a platform that allows us to actively bid for and develop new properties, to participate in the growth of Singapore as a destination."

Handling the offer with DBS, Goldman Sachs and OCBC, HSBC said the institutional tranche of the IPO was over 30 times subscribed.

Chang Tou Chen, managing director and head of global banking (Southeast Asia) at HSBC, said: "There was very strong demand from Asia, from Europe and both from long investors as well as hedge funds. This is reflective of the quality of the IPO...the dynamics are just right and the sponsor (Far East Organization) is very well known and trusted. It is also reflective of investors having the risk appetite to invest in IPOs again."

When it lists on August 27, the trust will be the fourth hospitality trust in Singapore.

The other three are CDL Hospitality Trusts, Ascott Residence Trust and Ascendas Hospitality Business Trust.

Ti Wee Pang, an analyst at DMG & Partners Research, said: "Compared to Ascendas Hospitality which was listed a couple of weeks back, Far East Hospitality's assets are all located in Singapore. Ascendas' assets are in China, Australia and Japan. 

"At the same time, Far East Hospitality gives the investor community confidence in the sense that they have been hotel operators for a long period of time, and that is the reason why even though they are offering a yield of 6 to 6.5 per cent, we believe it will be well received by the investor community."

Analysts said yields of real estate investment trusts in Singapore average 5.5 per cent.

Hospitality REITs have outperformed the Straits Times Index (STI) year-to-date - the sector is up more than 20 per cent year-to-date while the STI is only up by around 13 per cent. And analysts continue to be bullish on the sector as tourism growth appears to be holding up well amid the slowing economy.

Ti Wee Pang said: "At the moment, we are still maintaining an overweight call on the hospitality REIT sector. Although the visitor arrival rate dropped in May, going forward, especially in the second half of the year, we believe this visitor arrival rate will pick up again on the back of a couple of events - for example the Formula One race and the new attractions that will be opening."

- CNA/ms

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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