- January 19, 2021
We have published a research report to reiterate our Buy rating on Far East Consortium (35.HK). We believe the stock has more legs to run. While the HK Gov’s Designated Quarantine Hotels Programme will help to relief near term pressure to FEC’s Hotel Portfolio, in our view, the COVID-19 vaccination programmes across the world will drive the longer term fundamental improvement.
Designated Quarantine Hotels is a Shining Beacon amid COVID-19
- On 18 January 2021, the HK Government has announced the latest list of designated quarantine hotels, with Silka Far East Hotel in Tsuen Wan and Silka Seaview Hotel in Yau Ma Tei having been added to the list.
- FEC has a total of 6 Hotels currently on the designated list, offering 1,951 rooms, and we believe it will underpin its Hotel Occupancy Rates and ADR to offset the COVID-19 impact.
- According to the HK Government, there were a total of 12,000 rooms across 36 Hotels designated for quarantine purposes.
- Occupancy rates: Since the launch of the programme, there were 9,600 visitors and the overall occupancy rate reached ~60%.
- ADR: Based on the government’s announcement, we believe the ADR is at a fair market rate, with FEC’s room rates ranging from HK$480-3,800/night.
- The stock is still trading at a depressed 6.4x FY2021E P/E, offering a 8.1% FY2021E Dividend Yield. We reiterate our Buy Rating and our Target Price of HK$4.18/sh offers 54% upside.
