“We expect to see further finance cost savings in FY2026, with weighted average cost of debt likely to fall by another 30-40 basis points, according to management at its 2HFY2025 results briefing,” states the team.
Including the Singapore Airshow, Disney Cruise sailings, and other MICE events, FEHT’s management expects mid-single-digit RevPAR growth for its Singapore hotels in FY2026.
“We also believe that Four Points by Sheraton Nagoya (FPN) could benefit from the upcoming Asian Games in Nagoya in FY2026,” adds the CGS International team.
On the capital top-up, FEHT’s management expects the top-up to be phased out as interest expense savings to materialise and operational performance supports core distributions. Core distribution increased by 3.2% and 14.8% for FY2025 and 2H2025 respectively.
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As the interest environment becomes more favourable, both Lock and Li believe FEHT will more likely to tap into its sponsor’s hotel pipeline in Singapore. According to management, FEHT has over $600m of debt headroom before gearing reaches 45%.
“FEHT could also consider asset swaps with its sponsor, which could leverage on its balance sheet to rejuvenate these hotels, in our view,” state both analysts.
Hence, the CGS International team maintains an “add” call on FEHT as they continue to like its FY2026 outlook and growth potential ahead.
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“However, we trim our FY2026-FY2027 estimates based on FY2025 results and introduce FY2028 forecasts. Accordingly, we lowered our DDM-based target price to 72 cents, with cost of equity at 8.2% and long term growth of 2.3%, supported by an FY2026 dividend yield of 5.7%,” concludes the team.
As at 1.43pm, units in FEHT remained unchanged at 62 cents.
