Far East Hospitality IPO - Sure Profits?

After some quiet time without any interesting IPOs,

Here comes a favourite among Singapore conservative investors: Far East Hospitality IPO!

First and foremost - The Details of the IPO

• Prospectus Link here
• Offering Price: $0.93
• Opening & Closing Time for IPO; Commencement of Trading Time

• Targeting to raise about S$1.49 billion, Far East Hospitality Trust is the largest initial public offering (IPO) in Singapore this year.
• Trust's portfolio consists of seven hotels and four serviced residences in Singapore and is valued at over S$2 billion
• 4th hospitality trust in Singapore; Other three: CDL Hospitality Trusts, Ascott Residence Trust & Ascendas Hospitality Business Trust.

Pros

1. Institutional tranche of the IPO was over 30 times subscribed.
2. All the properties are situated in Singapore; easy to conduct due diligence on tenancy rate & stable outlook since Singapore tourism is still growing healthily
3. REITs have out-performed the STI as a whole & is seen by the local investors as safe yield plays -> more interest -> higher price

Cons

1. High Price of $0.93 is deterring some investors from joining the "fun"
2. Yield of 6% is slightly lower compared to other REITs

My 2 Cents

Ever since the STI has risen by so much, people are waiting on the sidelines for more positive indicators. I believe people will utilize their cash-pile to subscribe into IPOs while they are on the wait.

Furthermore, with cornerstone investors like Aberdeen Asia, APG, NTUC income & the IPO being 30x subscribed shows Great Demand!

Nevertheless, i won't recommend people to hold onto this stock as a 6% yield for hospitality Reit isn't really sufficient for me since you are taking more risks as compared to Healthcare Reits or Shopping Mall Reits which are more stable.

Punt and Get out of there Asap! :D

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