HOSPITALITY and student housing player Far East Orchard’s net profit fell 29.4 per cent to S$40.7 million for the six months ended Dec 31, 2024, hit by lower fair value gains and higher expenses, the company said in a bourse filing on Friday (Feb 28).
Revenue for the period rose 1.9 per cent to S$94.5 million, driven by rental growth in the purpose-built student accommodation (PBSA) segment, as well as contributions from the Southampton PBSA asset acquired in May 2023.
However, the company recognised lower net gains of S$24.9 million in H2, compared to S$57.8 million in the year-ago period. This was due to smaller fair value gains on investment properties and higher unrealised currency losses.
Total expenses also increased by S$1.2 million to S$48.2 million, with administrative costs up due to inflation and added operating costs to support the enlarged PBSA portfolio.
The company’s board has nevertheless proposed a first and final dividend of S$0.04 per share, along with a S$0.01 special dividend, following the successful divestment of Rendezvous Hotel Perth Central in December 2024.
This brings its total dividend for FY2024 to S$0.05 per share, up from S$0.04 per share in FY2023. The payment date for the FY2024 dividend has not been announced.
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For FY2024, Far East Orchard’s net profit was down 10.6 per cent to S$59 million while revenue rose 4.5 per cent to S$191.9 million.
Headwinds
Far East Orchard faced headwinds as occupancy in its PBSA portfolio dropped to 90 per cent in the 2024-2025 academic year, from 99 per cent in the academic year before that. The company attributed the fall to lower international student acceptance.
Meanwhile, its hospitality segment’s H2 revenue fell by about S$500,000 to S$64.1 million due to the weaker performance of its leased properties in Singapore and owned hotels in Australia. The revenue of one Australia hotel was also hit by the start of refurbishment works in October 2024.
A silver lining is the Japan market, where Far East Orchard saw additional revenue contributions from a leased hotel, which began operations in April 2023, and stronger performance from its managed properties.
Far East Orchard is riding the recovery in global travel and rental reversions in the PBSA segment, said chief executive Alan Tang.
“The strategic expansion of the PBSA business as part of strengthening our lodging platform has also contributed to the positive momentum towards the group’s (2025) strategy,” he added.
That said, Tang expects a “flattening” of the rent and room rate growth in the company’s PBSA and hospitality businesses, due to the “normalisation of the post-pandemic surge and market uncertainties”.
“Despite easing inflation and slow interest rate decline, we continue to operate in an elevated cost environment amid the ongoing economic and geopolitical uncertainties. We will adopt a cautious approach to remain focused on scaling our lodging platform,” he said.
Far East Orchard shares ended Friday flat at S$1.04, before results were announced.
