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Singapore Company Guide Far East Hospitality Trust Version 6 Refer to important disclosures at the end of this report | Bloomberg: FEHT SP | Reuters: FAEH.SI DBS Group Research . Equity 23 Feb 2017 HOLD Holding pattern Last Traded Price ( 22 Feb 2017): S$0.595 (STI : 3,122.20) Price Target 12-mth: S$0.63 (6% upside) (Prev S$0.62) Potential Catalyst: Recovery in the Singapore hospitality market, and acquisitions Where we differ: In line with consensus Analyst Mervin SONG CFA +65 6682 3715 [email protected] Derek TAN +65 6682 3716 [email protected] What’s New 4Q16 DPU of 1.17 Scts (-4.3% y-o-y) slightly ahead of expectations Excess room supply results in 2-7% decline in hotel and serviced residences RevPAR Exploring potential acquisition which will boost DPU Limited re-rating catalysts. We maintain our HOLD call with a revised TP of S$0.63. As a Singapore-focused REIT and with competitive pressures in the Singapore hospitality market that are expected to persist, we believe there are limited re-rating catalysts for Far East Hospitality Trust (FEHT) in the near term. This is despite the inherent long-term value given that FEHT is trading at c.0.65x P/BV. Competitive pressure to persist. With 6% increase in room supply in 2017 versus a projected 4% growth in visitor arrivals, we believe the Singapore hospitality market will remain under pressure. Thus, we have pencilled in a 4-5% fall in RevPAR for FEHT’s hotels and serviced residences. This is turn should translate to a 4% dip in FY17 DPU before a potential recovery from 2018 onwards when supply pressure ease. Strong balance sheet. Even though we are cautious on FEHT’s near-term earnings, there is significant upside to our forecast if FEHT deploys its strong balance sheet well. FEHT’s gearing as at end-December 2016 stood at approximately 32% and its sponsor provides a clear and visible ROFR pipeline of seven properties. Price Relative Valuation: After incorporating slightly better performance from FEHT’s commercial operations, we raised our DCF-based TP from S$0.62 to S$0.63. Forecasts and Valuation FY Dec (S$m) Gross Revenue Net Property Inc Total Return Distribution Inc EPU (S cts) EPU Gth (%) DPU (S cts) DPU Gth (%) NAV per shr (S cts) PE (X) Distribution Yield (%) P/NAV (x) Aggregate Leverage (%) ROAE (%) 2015A 115 104 33.2 82.2 4.20 (5) 4.60 (11) 93.9 14.2 7.7 0.6 32.5 4.4 DPU Chng (%): Consensus DPU (S cts): Other Broker Recs: 2016A 109 98.4 30.1 78.1 3.30 (21) 4.33 (6) 90.9 18.0 7.3 0.7 32.1 3.6 2017F 108 97.3 64.2 75.1 3.54 7 4.14 (4) 90.7 16.8 7.0 0.7 33.5 3.9 2018F 113 102 67.1 78.2 3.68 4 4.28 3 90.1 16.1 7.2 0.7 33.5 4.1 B: 2 5 4.10 S: 2 1 4.20 H: 4 Key Risks to Our View: Rebound in demand and acquisitions. Our cautious stance on FEHT is premised on a supply imbalance in the Singapore hospitality market. However, a significant rebound in demand, absorbing the new room supply, and FEHT utilising its strong balance sheet, would lead to upside risks to our DPU estimates and TP. At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders (%) Golden Development Pte Ltd Golden Landmark Pte Ltd Far East Organization Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Real Estate / Real Estate Investment Trusts 1,804 1,074 / 760 22.4 10.6 10.1 38.2 0.70 Source of all data on this page: Company, DBS Bank, Bloomberg Finance L.P. ASIAN INSIGHTS ed: TH / sa: JC, PY VICKERS SECURITIES Company Guide Far East Hospitality Trust WHAT’S NEW Drag from excess supply Sentosa hotel project. With a relatively low gearing, Impacted by Singapore headwinds FEHT guided that it is exploring the potential to FEHT delivered a 4Q16 DPU of 1.17 Scts (-4.3% y-o-y). acquire a hotel from its sponsor. For FY16, DPU was 4.33 Scts (-5.9%) which was a tad Average cost of debt stood at 2.5%. There is potential higher than our estimate of 4.26 Scts and consensus for FEHT’s borrowing costs to dip marginally as FEHT is estimates of 4.2 Scts. about to refinance S$250m debt on lower margins. While we had expected DPU to be down y-o-y due to The proportion of fixed rate debt was maintained at the excess supply in Singapore (4Q16 NPI down 5.4% 71%. y-o-y to S$24.9m, the slightly better-than-expected NAV per unit fell to S$0.909 from S$0.939, mainly results was due to lower-than-expected interest due to an increase in the number of units outstanding. expenses as well as higher contribution from FEHT’s commercial operations (rental of retail and office Delay in completion of Outpost and Village hotel Sentosa space) compared to our estimates. FEHT announced that Outpost and Village Hotel Sentosa in which it has a 30% stake will now be Falls in RevPAR for both hotels and serviced residences completed in 2019 versus the original timeline of With supply headwinds in Singapore and weaker 2018. The delay is caused by the need to construct an corporate demand (share of corporates are now at underground car park. However, the project remains 37% versus 41% in 4Q15), 4Q16 RevPAR for hotels on budget despite changes to the design. fell 7.3% y-o-y to S$136. However, this was better than the 9.2% decline in overall industry RevPAR in Raise FY17-18F DPU by 1-5% 4Q16. Drilling deeper, hotel occupancy increased To account for the lower-than-expected interest costs 120bps to 86.5% in 4Q16, partially mitigating the and higher-than-expected contribution from FEHT’s 8.6% y-o-y fall in ADR. commercial operations as well as now assuming 100% Meanwhile, serviced residences had a better payout ratio versus 97% previously, partially offset by performance compared to the hotels, with 4Q16 some downtime at Orchard Parade hotel as it RevPAR falling a smaller 2.3% y-o-y to S$176. undertakes the potential refurbishment of hotel Occupancy was the main culprit for the fall in RevPAR, rooms, we raised our FY17-18F DPU by 2-5%. In down 290bps to 79.7%. This offset the 1.2% y-o-y addition, we have increased our DCF-based TP to increase in ADR. S$0.63 from S$0.62. Decline in property values Maintain HOLD with revised TP of S$0.63 FEHT reported a S$29.5m decline in property value, With RevPAR for Singapore likely to remain under which was attributed to weaker operating pressure this year resulting in a decline in DPU, we see performance, partially offset by a slight compression in limited re-rating catalysts in the near term. Thus, we cap rates following a change in valuers. maintain our HOLD call with a revised TP of S$0.63, However, gearing as at end-December declined pending the results briefing later this morning. marginally to 32.1% from 32.5% in 4Q15 owing to the increased value of FEHT’s 30% interest in the ASIAN INSIGHTS Page 2 VICKERS SECURITIES Company Guide Far East Hospitality Trust Quarterly / Interim Income Statement (S$m) 4Q2015 3Q2016 4Q2016 % chg yoy % chg qoq Gross revenue 28.9 28.0 27.5 (4.6) (1.7) Property expenses (2.6) (2.7) (2.7) 4.4 0.1 Net Property Income 26.3 25.4 24.9 (5.4) (1.9) Other Operating expenses (3.3) (3.2) (3.2) (4.8) (0.8) Other Non Opg (Exp)/Inc 0.60 (1.9) 4.29 619.1 N/A Net Interest (Exp)/Inc (5.3) (4.9) (4.8) 8.4 0.7 0.0 0.0 0.0 - - FY Dec Exceptional Gain/(Loss) Net Income 18.3 15.4 21.2 15.8 37.5 Tax 0.0 0.0 0.0 - - Minority Interest 0.0 0.0 0.0 - - 18.3 15.4 21.2 15.8 37.5 (23.5) 15.4 (8.3) 64.6 nm Non-tax deductible Items 2.38 4.87 (1.0) (142.0) (120.5) Net Inc available for Dist. 20.7 20.3 20.2 (2.3) (0.5) 91.1 90.5 90.3 100.0 100.0 100.0 Net Income after Tax Total Return Ratio (%) Net Prop Inc Margin Dist. Payout Ratio Source of all data: Company, DBS Bank ASIAN INSIGHTS VICKERS SECURITIES Page 3 Company Guide Far East Hospitality Trust Net Property Income and Margins (%) CRITICAL DATA POINTS TO WATCH Earnings Drivers: Downturn in the Singapore hospitality market. The Singapore hospitality market faces the challenge of navigating a 6% increase in hotel room supply this year but at the same time, only a modest recovery in total visitor days and weak corporate demand which is typically higher yielding. In such an environment, we believe hotels, including those owned by FEHT, will face pressure on occupancy and ADRs. Thus, we estimate that the price-heightened competition will lead to 45% declines in FEHT’s FY17F hotel and serviced residence RevPAR/RevPAU. Some cushion from asset enhancement initiatives. Partially mitigating the effects of a supply imbalance in the Singapore hospitality market are the asset enhancement initiatives (AEI) that FEHT has undertaken. The refurbishments are expected to help maintain FEHT’s relevance in the market place as well as boost occupancy and ADR over the medium term. The following are the AEIs that FEHT has completed across its portfolio: (1) extension of outdoor refreshment area at Village Residence Robertson Quay, (2) soft refurbishment of club & suite rooms and meeting areas at Village Hotel Changi, (iii) reconfiguration of the serviced office space to create nine additional units as well as the upgrade of the main lobby, breakfast lounge and pantry at Central Square (Village Residence Clarke Quay), (iv) refurbishment of 2- and 3-bedroom units at Regency House, and (v) upgrading of the swimming pool, function rooms, lobby area and lobby bar. Medium-term outlook remains bright. Despite the short-term headwinds, the medium-term outlook for FEHT remains bright. With no new hotel land sites being released by the Singapore government over the last two years, supply could be constrained from 2018 onwards. In addition, FEHT should benefit from the opening of the 850-room Sentosa hotel development in 2018. Acquisitions yet to be priced in. With gearing at only 32%, FEHT is well positioned to expand its portfolio through acquisitions. Assuming FEHT gears up to the 40% level, we estimate the trust to have c.S$300-350m of debt headroom. Through its sponsor, Far East Organization, FEHT has a visible acquisition pipeline. In particular, it has the right of first refusal over seven properties. ASIAN INSIGHTS Page 4 Net Property Income and Margins (%) Distribution Paid / Net Operating CF Interest Cover (x) Source: Company, DBS Bank VICKERS SECURITIES Company Guide Far East Hospitality Trust Balance Sheet: Gearing unchanged. FEHT’s gearing at end-4Q16 was stable at c.32% which is comfortably below management’s 40% and MAS’s new 45% gearing limits. Aggregate Leverage (%) Moderate exposure to rising interest rates. Currently, 71% of FEHT’s borrowings are under fixed rates, reducing its exposure to volatility in interest rates. Share Price Drivers: Negative near-term sentiment. FEHT’s share price has been weak over the past year due to a combination of soft tourist arrivals and large new room supply which has translated into a fall in RevPAR and DPU. While tourist arrivals are recovering, new hotel supply should continue to outpace demand. Thus, we believe there are limited re-rating catalysts for the stock in the near term. Key Risks: Interest rate risk. Any increase in interest rates will result in higher interest payments that the REIT has to make annually to service its loans. This reduces the income available for distribution, which will result in lower distribution per unit (DPU) for unitholders. ROE (%) Distribution Yield (%) Competitive landscape. The Singapore hospitality market has been impacted by a decline in tourist arrivals in 2014 and 2015 thus far. With an increase in new hotel supply in 2016 and 2017 and if demand does not recover, FEHT’s earnings may be impacted. Company Background Far East Hospitality Trust (FEHT) is a hospitality stapled group comprising Far East H-REIT and Far East H-Business Trust. Far East H-REIT is a Singapore-based real estate investment trust, which invests in hospitality assets. It owns eight hotels and four serviced residences. PB Band (x) Source: Company, DBS Bank ASIAN INSIGHTS VICKERS SECURITIES Page 5 Company Guide Far East Hospitality Trust Income Statement (S$m) FY Dec Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Preference Dividend Net Income After Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Dist. Payout Ratio (%) Net Prop Inc Margins (%) Net Income Margins (%) Dist to revenue (%) Managers & Trustee’s fees ROAE (%) ROA (%) ROCE (%) Int. Cover (x) Source: Company, DBS Bank 2014A 2015A 2016A 2017F 2018F 122 (11.7) 110 (13.8) (0.8) (17.5) 0.0 78.0 0.0 0.0 0.0 78.0 71.3 20.2 91.5 115 (11.0) 104 (13.1) 4.93 (20.4) 0.0 75.0 0.0 0.0 0.0 75.0 33.2 48.9 82.2 109 (10.7) 98.4 (12.6) (6.3) (19.8) 0.0 59.6 0.0 0.0 0.0 59.5 30.1 18.6 78.1 108 (11.0) 97.3 (12.5) 0.0 (20.6) 0.0 64.2 0.0 0.0 0.0 64.2 64.2 10.9 75.1 113 (11.4) 102 (13.0) 0.0 (21.6) 0.0 67.1 0.0 0.0 0.0 67.1 67.1 11.2 78.2 (0.6) (1.7) (15.5) 100.0 90.4 64.1 75.2 11.3 4.5 3.1 3.9 5.5 (5.8) (5.8) (3.9) 100.0 90.4 65.4 71.7 11.4 4.4 3.0 3.6 4.4 (4.9) (5.1) (20.6) 100.0 90.2 54.6 71.7 11.6 3.6 2.4 3.5 4.3 (0.7) (1.1) 7.8 100.0 89.8 59.3 69.4 11.5 3.9 2.6 3.5 4.1 4.3 4.5 4.5 100.0 89.9 59.3 69.2 11.5 4.1 2.7 3.6 4.1 ASIAN INSIGHTS Page 6 The decline in earnings is largely a result of a projected decline in FEHT’s serviced residence and hotel RevPAR with a recovery from 2018 onwards as supply pressures ease VICKERS SECURITIES Company Guide Far East Hospitality Trust Quarterly / Interim Income Statement (S$m) FY Dec 4Q2015 1Q2016 Gross revenue Property expenses Net Property Income Other Operating expenses Other Non Opg (Exp)/Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Net Income Tax Minority Interest Net Income after Tax Total Return Non-tax deductible Items Net Inc available for Dist. Growth & Ratio Revenue Gth (%) N Property Inc Gth (%) Net Inc Gth (%) Net Prop Inc Margin (%) Dist. Payout Ratio (%) 2Q2016 3Q2016 4Q2016 28.9 (2.6) 26.3 (3.3) 0.60 (5.3) 0.0 18.3 0.0 0.0 18.3 (23.5) 2.38 20.7 27.4 (2.7) 24.7 (3.2) (7.5) (5.2) 0.0 8.82 0.0 0.0 8.82 8.82 10.6 19.4 26.1 (2.7) 23.5 (3.1) (1.2) (5.0) 0.0 14.2 0.0 0.0 14.2 14.2 4.10 18.3 28.0 (2.7) 25.4 (3.2) (1.9) (4.9) 0.0 15.4 0.0 0.0 15.4 15.4 4.87 20.3 27.5 (2.7) 24.9 (3.2) 4.29 (4.8) 0.0 21.2 0.0 0.0 21.2 (8.3) (1.0) 20.2 (3) (2) (13) 91.1 100.0 (5) (6) (52) 90.2 100.0 (4) (5) 61 89.8 100.0 7 8 9 90.5 100.0 (2) (2) 38 90.3 100.0 Balance Sheet (S$m) FY Dec 2014A 2015A 2016A 2017F 2018F Investment Properties Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets 2,476 15.6 20.9 0.0 19.3 5.45 2,537 2,439 15.5 25.4 0.0 30.5 10.4 2,521 2,418 16.6 15.4 0.0 34.7 3.97 2,489 2,428 31.6 25.0 0.0 17.1 3.97 2,506 2,431 31.6 20.9 0.0 17.9 3.97 2,506 ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Unit holders’ funds Minority Interests Total Funds & Liabilities 116 3.28 6.26 680 8.49 1,724 0.0 2,537 36.9 2.80 10.1 780 7.21 1,684 0.0 2,521 292 1.93 10.6 531 7.62 1,646 0.0 2,489 31.8 2.92 10.6 807 7.62 1,646 0.0 2,506 31.8 3.05 10.6 807 7.62 1,646 0.0 2,506 Non-Cash Wkg. Capital Net Cash/(Debt) Ratio Current Ratio (x) Quick Ratio (x) Aggregate Leverage (%) Z-Score (X) 15.2 (774) 27.9 (792) 26.1 (807) 7.57 (814) 8.19 (818) 0.4 0.4 31.3 0.9 1.3 1.3 32.5 0.9 0.2 0.2 32.1 0.9 1.0 1.0 33.5 0.9 0.9 0.9 33.5 0.9 FEHT remains in a strong financial position with gearing in the low 30s Source: Company, DBS Bank ASIAN INSIGHTS VICKERS SECURITIES Page 7 Company Guide Far East Hospitality Trust Cash Flow Statement (S$m) FY Dec Pre-Tax Income Dep. & Amort. Tax Paid Associates &JV Inc/(Loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Net Invt in Properties Other Invts (net) Invts in Assoc. & JV Div from Assoc. & JVs Other Investing CF Net Investing CF Distribution Paid Chg in Gross Debt New units issued Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Operating CFPS (S cts) Free CFPS (S cts) 2014A 2015A 2016A 2017F 2018F 78.0 0.0 0.0 0.0 2.56 29.0 110 (8.1) 0.0 (15.6) 0.0 0.0 (23.7) (93.4) 15.6 0.0 (16.3) (94.1) 0.0 (8.3) 75.0 0.0 0.0 0.08 9.55 26.0 111 (5.0) 0.0 (21.3) 0.0 0.0 (26.3) (84.0) 21.3 0.0 (17.1) (79.8) 0.0 4.54 59.6 0.0 0.0 0.04 0.02 36.4 96.0 (8.1) 0.0 (5.1) 0.0 0.0 (13.2) (78.7) 5.10 0.0 (19.2) (92.8) 0.0 (10.0) 64.2 0.0 0.0 0.0 18.6 10.9 93.7 (10.0) 0.0 (15.0) 0.0 0.0 (25.0) (75.1) 16.0 0.0 0.0 (59.1) 0.0 9.56 67.1 0.0 0.0 0.0 (0.6) 11.2 77.6 (3.4) 0.0 0.0 0.0 0.0 (3.4) (78.2) 0.0 0.0 0.0 (78.2) 0.0 (4.0) 6.04 5.73 5.66 5.92 5.33 4.88 4.15 4.62 4.30 4.08 Equity contribution for FEHT’s 30% stake in the 850-room Sentosa hotel development Source: Company, DBS Bank Target Price & Ratings History Source: DBS Bank Analyst: Mervin SONG CFA Derek TAN ASIAN INSIGHTS Page 8 VICKERS SECURITIES Company Guide Far East Hospitality Trust DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends Completed Date: 23 Feb 2017 08:47:26 (SGT) Dissemination Date: 23 Feb 2017 09:04:50 (SGT) GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank Ltd. This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) (b) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ASIAN INSIGHTS VICKERS SECURITIES Page 9 Company Guide Far East Hospitality Trust ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in the report. The DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. As of 23 Feb 2017, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates have a proprietary position in Far East Hospitality Trust recommended in this report as of 31 Jan 2017. 2. DBS Bank Ltd does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months. RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBS Bank Ltd. 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ASIAN INSIGHTS Page 10 VICKERS SECURITIES Company Guide Far East Hospitality Trust Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. 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