Far East Orchard - A Rising Tide
- Squirrel
- 40 minutes ago
- 7 min read
How’s your year been in 2025? It was a year ago that I had posted the article “Now is the best time to be invested in the Singapore equity market”. Since then, I had not made any further postings, as my belief back then was that an investor in Singapore equities would not need specific undervalued securities to make a good return. There was an abundance of cheaply traded stocks that one can choose from, which provides a good margin of safety and a decent dividend. What drives their movements next, in my humble opinion, would likely be boiled down to chance and hype rather than how much they are undervalued by. It feels like a better idea for readers to stay invested rather than which company to be invested in. Alas, do remember this is the time when all boats are lifted. Please do your own due diligence after reading anything out there, including articles from The Squirrel’s Drey.
A quick recap of what has happened during this period. The MAS taskforce has announced a series of initiatives to revitalise the Singapore equity market. What has been most eye catching is the launch of the Equity Market Development Programme (EQDP), which commits $5 billion to strengthen the local asset management and research ecosystem and increase investor interest in Singapore’s equities market. The programme’s emphasis is tilt towards small and mid-caps. In July, the programme has awarded $1.1 billion to 3 asset managers and committed $50 million to strengthening local equity research. The remaining asset managers will be announced in 4Q 2025.
So, what does this mean, and why this article? We have all seen the price actions that has sprung up across the small and mid-caps space since the start of the year. Many firms have been taken private along the way. Various research houses have published reports that shortlists potential beneficiaries to the EQDP. The plan to reflate the valuation of local equity seems to be taking effect. This spreading rally is unlike prior bull markets, and likely to reach most undervalued companies due to the number of participants in this coordinated effort to boost the Singapore market. Many undervalued companies have surged in pricing, but is there any laggards that are yet to be recognised and poised to benefit from the EQDP?
Far East Orchard (FEOR)
Far East Orchard Limited is a real estate company with a lodging platform that caters to the hospitality and student accommodation sectors. The company’s presence spans across multiple regions including Singapore, Malaysia, Australia, UK, Japan and Europe. Far East Orchard is also a member of Far East Organisation, one of Singapore’s largest private property developers.
At the point of writing, the company is trading at $1.30, which translates to a market capitalisation of $628m. This falls squarely in the small to mid-caps section of the equity market, that is still large enough to support the liquidity needs and AUM sizing of the larger fund managers. And at this pricing, the price to book ratio of the company is only 0.46! Talk about a margin of safety. The price currently reflects a 10.6 price to earnings ratio with a growing contribution from the student accommodation and hospitality segment.
Let’s take a deeper look at the balance sheet for Far East Orchard.
Besides the $200m in cash, majority of the balance sheet strength arise from JVs and properties held. The categories above are not that helpful in understanding the attribution of value to different parts of the group, so let’s see these assets in terms of the sectors they belong to, zoning in on the more material parts.
As of Dec 2024 (Updated for additional 6.7% in WSPL)
Medical Suites (HFS + Investment Properties) $284,364
Malls + Offices + Residential (Westminster + Woodlands Square (40%)) $204,909
PBSA UK (Excluding Private fund set up in 2024) $669,435
Freehold and Leasehold Land in SG + Orchard Rendezvous Hotel $464,099
Freehold Land and Buildings in Australia + Toga Trust + Perth Shops $313,759
Quite a diversified range of properties held on the balance sheet right?
UK PBSA: The Crown Jewel
Let’s zero in on what makes UK PBSA (Purpose Built Student Accommodation) such an attractive asset class. The UK remains one of the world’s premier higher education destinations, drawing students from the EU, Asia, and beyond. Demand for quality, well-located student accommodation continues to outstrip supply, ensuring robust occupancy rates.
And lately, the global spotlight has turned sharply towards the UK’s education sector, thanks to recent developments in the United States. The Trump administration’s actions against Harvard and other leading universities, alongside a broader tightening of US higher education policy, are casting a chill over international applications to the US. This policy climate, marked by visa uncertainties and headline-grabbing investigations, has left many international students and their families seeking more stable alternatives. The UK, with its globally recognised institutions and friendlier post-study work pathways, stands out as the natural beneficiary.
This surge in international interest means UK PBSA assets are positioned to see even stronger demand, further boosting occupancy and rental growth for operators like Far East Orchard. FEOR’s PBSA assets are strategically located in top-tier university towns—think Liverpool, Sheffield, Leeds, and Newcastle. The recent performance of this sector—buoyed by robust rental growth and record occupancy—makes it one of the most coveted alternative real estate plays globally.
A quick check on the value of PBSA assets on the balance sheet shows it at S$669m. Coupled with the recent closing of its first private student accommodation development fund (FE UK Student Accommodation Development Fund) which secured £96m (S$166m equivalent) in funding, Far East Orchard is gathering up a substantial inventory of PBSA assets.
Balance Sheet Strength Meets Monetisation Optionality
A quick glance at FEOR’s balance sheet shows a healthy mix of recurring income and asset flexibility. But the real excitement is the optionality embedded in its PBSA assets. The Singapore market has witnessed two masterclasses in unlocking value from overseas student accommodation, courtesy of Centurion Corporation and Wee Hur Holdings.
Centurion Corporation is the talk of town for the last few months. The company grew its UK student housing footprint aggressively, together with Singapore based Purpose Built Workers Accommodation and then recycled capital via an IPO that starts trading on 25 September as Centurion Accommodation REIT. The result? Sharper focus, improved ROE, and repeatable capital recycling strategies. The prospectus also includes a wealth of data for UK PBSAs, which is worth a read. A diagram of interest extracted from the prospectus as follows.
Wee Hur Holdings took years to grow their Australian PBSA assets in a privately held fund. In 2024, Wee Hur announced a sale of said assets to Greystar. With the news hitting the stands, Wee Hur has since tripled its market value. Having proven its ability to recycle capital and more PBWAs sitting on its books, the proven property developer continues to trend as a market darling.
For FEOR, these are not mere anecdotes, but playbooks. The company sits on a valuable portfolio of stabilised, income-producing PBSA properties, hospitality and healthcare assets. With renewed liquidity in the SGX ecosystem thanks to the $5 billion EQDP and proven playbooks, the catalysts for a rerating of Far East Orchard are raring to go. And the Far East Organisation is no stranger to spinning off assets into a REIT, having done so with the Far East Hospitality Trust in 2012.
Valuation: Deep Value with Real Growth Upside
Despite these advantages, FEOR continues to trade at a discount to its net asset value (NAV), even as recurring income and asset values climb. The company’s low PE ratio and PB ratio reflect the market’s historic hesitation with mid-cap property names, but as liquidity returns and the broader market begins to re-rate asset-rich plays, that gap could narrow substantially.
For those who value downside protection as much as upside potential, FEOR offers both: a fortress-like balance sheet, defensive earnings, and clear levers for value unlocking.
Risks
Every company comes with its risks. Far East Orchard is no exception. The UK PBSAs might be a much sought after asset class currently, but there are certain factors we must consider. Prime and foremost is the strength of the British Pound. Like various developed economies globally, the UK is rather heavily indebted. Paired with sluggish growth, and impacts from trade tariffs, this can lead to weakness in the currency. Several universities in the UK have run into financial difficulties, which could post a challenge to growing the student cohort.
More broadly, the company’s share price has been stagnating and on a downtrend for more than 10 years, despite a very deep discount to book value. It can continue to do so and would fall into what we call a “value trap”. Opportunity costs run high in this bullish environment, with many investment choices available out there.
Conclusion
Far East Orchard is a prime candidate for rerating as MAS’s $5 billion liquidity wave approaches the market. With a best-in-class UK PBSA portfolio ready to be monetised, clear value-creation roadmaps from Centurion and Wee Hur to follow and the experience to do so, amid improving market sentiment. FEOR has the assets to pursue a REIT listing, be it a PBSA pure play or a mixture. Otherwise, there are a multitude of players looking to directly acquire UK PBSA assets. It would not be surprising to see a move igniting interest in this company happening sometime in the near future. After all, an asset-light strategy is what is being pursued by the company and mentioned often in their annual report.
What are your thoughts on the above? Are there any issues or pitfalls that you would like to highlight? Feel free to discuss in the comments below. We are all here to learn!
Disclaimer: All posts on The Squirrel's Drey are for informational and discussion purposes only. This is not a recommendation to buy or sell securities discussed. Please do your own due diligence before investing.
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