Results: Far East Hospitality Trust Delivered A Surprise Loss And Now Analysts Have New Forecasts

Last week saw the newest full-year earnings release from Far East Hospitality Trust (SGX:Q5T), an important milestone in the company's journey to build a stronger business. It was a pretty negative result overall, with revenues of S$79m missing analyst predictions by 8.5%. Worse, the business reported a statutory loss of S$0.048 per share, a substantial decline on analyst expectations of a profit. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Far East Hospitality Trust

After the latest results, the six analysts covering Far East Hospitality Trust are now predicting revenues of S$87.4m in 2021. If met, this would reflect a notable 10% improvement in sales compared to the last 12 months. Earnings are expected to improve, with Far East Hospitality Trust forecast to report a statutory profit of S$0.022 per share. In the lead-up to this report, the analysts had been modelling revenues of S$91.0m and earnings per share (EPS) of S$0.022 in 2021. The consensus seems maybe a little more pessimistic, trimming their revenue forecasts after the latest results even though there was no change to its EPS estimates.

The average price target was steady at S$0.65even though revenue estimates declined; likely suggesting the analysts place a higher value on earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Far East Hospitality Trust, with the most bullish analyst valuing it at S$0.74 and the most bearish at S$0.51 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Far East Hospitality Trust shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Far East Hospitality Trust is forecast to grow faster in the future than it has in the past, with revenues expected to grow 10%. If achieved, this would be a much better result than the 3.3% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 8.1% next year. Not only are Far East Hospitality Trust's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Still, earnings are more important to the intrinsic value of the business. The consensus price target held steady at S$0.65, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Far East Hospitality Trust analysts - going out to 2022, and you can see them free on our platform here.

Even so, be aware that Far East Hospitality Trust is showing 2 warning signs in our investment analysis , and 1 of those is significant...

If you decide to trade Far East Hospitality Trust, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.