Far East Hospitality Trust has been one of the most avoided Reits and shunned by investors for quite sometime having poor performance since it went public in late 2012 with an IPO price of 93 cents.
Since then, it slides down almost on a clear downtrend every year given that the industry in general is cyclical in nature, especially with the hospitality industry seeing major supply coming in.
I picked up the shares not too long ago at 59 cents in Mar 17 which I blogged here. From the comments section in the post, you can easily see so much skepticism with the way how others see the company itself. To me, if you are buying with no consideration of margin of safety, that’s generally what you are going to get, even in good companies.
The share price has since ran up to 65.5 cents last Friday closing which I have used the opportunity to divest all of them at a 12.2% profits. The holding period is about 2 months plus.
I like deals that runs like this. Short and sweet and I am able to redeploy my capital quickly. It is also part of my strategy to protect my capital this way should a big tsunami hits the market and I have those profits locked and cash on hand ready.
For those who are interested in the company, you may also want to refer my agm notes here.
I’ll just quickly again summarize the reasons for divesting the shares.
1.) I wanted to increase my cash holding allocation in the portfolio.
2.) It hits my standard target of 10% profits and I wanted to lock in those profits as part of my strategy.
3.) News of the hospitality sectors revival and revpar rebounding have been spread all over the newspaper and media. To me, you get in before the news are out so you can get majority of the meats there. Once it’s out there in the market, you might get momentum play in the companies but your margin of safety is also lower. I feel more assured hitting the 10% profits buying at 59 cents to 65 cents, than buying at 65 cents and waiting for it to hit 73 cents. But that’s just my preference.
4.) This year will continue to be poor for the hospitality sectors, though signs are likely such that it is bottoming. If I just annualized the 0.93 cents it paid out in the first quarter, that would yield around 5.6% based on current share price given the run up. A bit too short for me for the short term.
5.) I have more than sufficient exposure in the hospitality sectors in CDLHT, my current top position, so I am able to take profits off the table from FEHT and still get decent exposure from the sectors.
6.) Market depth showing 66 cents a huge resistance. Again, my favorite play to divest the shares one spread below the resistance once the fundamentals are sorted out.
It’s hard to envision what might happen from here. They could very well move up further from here and gain another 10% (which means I am missing) so I am just transferring my ownership to those who wants to take it from here.
Meanwhile, I’ll continue to build up my cash position and look for other opportunities again.