Frasers Hospitality Trust Analysis @ 27 December 2020

Basic Profile & Key Statistics

Frasers Hospitality Trust (FHT) is a stapled group comprises of Frasers Hospitality Real Estate Investment Trust (FH-REIT) and Frasers Hospitality Business Trust (FH-BT). FHT invests in hotels and serviced residence units which currently owns 15 properties across 7 countries.

Performance Review

2H Gross revenue and NPI decreased by YoY by 65.2% and 73.7%. Despite negative distributable income, unitholders would still be able to receive distribution due to the release of retention from 1H FY2020.

REVPAR has dropped YOY across all locations, which is expected due to COVID-19 situation. 

For Japan and UK portfolio, occupancy has increased slightly since July.  As for Singapore portfolio, the occupancy drop in September due to InterContinental Singapore had ceased serving as an SHN facility. The Westin Kuala Lumpur in Malaysia has temporarily ceased operations since May.

Lease Profile

• WALE is long at 13.7 years where the highest lease expiry of 12.6% falls in 2024. 
• Weighted average land lease expiry is long at 87.97 years.

Debt Profile

• Gearing ratio is moderate at 37.7%. 
• Cost of debt is low at 2.3% with a high % of unsecured debt at 96.3%.
• Fixed rate debt % is slightly low at 74.9%. 
• Interest coverage ratio is low at 2.3 times. 
• WADE is long at 3.62 years where the highest debt maturity of 28.4 % falls in 2024.

Diversification Profile

• Top geographical and top property contributions are the same at 24.7%. It is considered low for top geographical contribution but high for top property contribution.
• Top tenant and top 10 tenant contributions are high at 15% and 93.9% respectively.
• Top 3 geographical contributions are from Australia, Singapore and England.

Key Financial Metrics

• Property yield, distribution on capital and distribution margin are low at 3%, 1.2% and 30.4% respectively. 
• Management fee is high at 33.8% in which unitholders receive S$ 2.96 for every dollar paid to the manager. 
• Including remaining retention of S$ 3 million, figures for management fees over distribution, distribution on capital and distribution margin would be 30.4%, 1.3% and 33.8% respectively.

Trends

• Downtrend - DPU, NAV per Unit, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

• Dividend Yield  - Past 4 quarters DPU @ 1.3982 cents / average yield @ 6.74% = S$ 0.205. Including retention, DPU @ 1.5539 cents / average yield @ 6.74% = S$ 0.23. 
• Price/NAV - NAV @ S$ 0.652 x average P/NAV @ 0.9 = S$ 0.585. 

Author's Opinion

Favorable	Less Favorable
Long WALE	Low Interest Cover Ratio
Well Spread Lease Expiry	High Top Property Contribution
Long Weighted Average Land Lease Expiry	High Top Tenant & Top 10 Tenants Contributions
Low Cost of Debt	Low Property Yield
High Unsecured Debt %	High Management Fee
Long WADE	Low Distribution on Capital
Low Top Geographical Contribution	Low Distribution Margin
	DPU Downtrend
	NAV per Unit downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

On a QoQ basis, FHT occupancy has generally seen improvements. However, with many countries still imposing lockdowns and restrictions, it is very challenging for FHT to improve performance drastically. With the current vaccine availability, hopefully, lockdowns/restrictions for more countries would be lifted soon.

For more information, you could refer to:

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SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss, or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.