Frasers Hospitality Trust Review @ 15 November 2021

Basic Profile & Key Statistics

Frasers Hospitality Trust (FHT) invests in hotels and serviced residence units which currently owns 15 properties across 7 countries.

Performance Highlight

Gross revenue and NPI improved YoY due to gradual recovery from COVID-19. The DPS is lower due to inclusive of S$ 22.3 million retention released in 2H FY2020.

As compared to last year, REVPAR has been improved.

Besides Japan, the REVPAR for 2H FY21 is improved as compared to 1H FY21.

On 29 Oct, FHT announced for divestment of Sofitel Sydney Wentworth. FHT will first purchase the freehold reversionary interest from FPL and then divest it on a freehold basis. The capital gain is at AUD 80.45 mil as compared to the purchased price.

After the divestment, the pro-forma NAV per unit would increase to 66.05 cents while DPU would decrease by 0.1727 cents, based on FY 21 result.

Related Parties Shareholding

• REIT sponsor's shareholding is moderate at 25.862%
• REIT manager's shareholding is moderate at 1%
• Directors of REIT manager's shareholding is high at 36.771%

Lease Profile

• WALE is long at 12.7 years
• Highest lease expiry within 5 years is low at 12.6% which falls in 2024
• Weighted average land lease expiry is long at 86.97 years 

Debt Profile

• Gearing ratio is high at 42.2%
• Cost of debt is low at 2%
• Fixed rate debt % is moderate at 77.2%
• Unsecured debt % is high at 96.7%
• WADM is short at 2.56 years
• Highest debt maturity within 5 years is low at 27.3% which falls in 2025
• Interest coverage ratio is low at 2.2 times

Diversification Profile

• Top geographical contribution is low at 23.6%
• Top property contribution is high at 22.4%
• Top 5 properties contribution is moderate at 62.2%
• Top tenant contribution is high at 15% 
• Top 10 tenants contribution is high at 93.9% 
• Top 3 countries contribution is from Australia, Singapore and England which contribute more than 70% of GRI

Key Financial Metrics

• Property yield is low at 2.5% 
• Management fees over distribution is high at 43.7% in which unitholders receive S$ 2.29 for every dollar paid 
• Distribution on capital is low at 0.8%
• Distribution margin is low at 22.1%

Include retention, management fees over distribution, distribution on capital and distribution margin would be 36.2% (high), 1% (low) and 26.7% (low) respectively.

Trends

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

Relative Valuation

• P/NAV - Average for 1y and 3y; Lowe than average for 5y
• Dividend Yield - Below -1SD for 1y, 3y and 5y

Author's Opinion

Favorable	Less Favorable
High Directors of REIT Manager's Shareholding	High Gearin Ratio
Long WALE	Short WADM
Well Spread Lease Expiry	Low Interest Coverage Ratio
Long Weighted Average Land Lease Expiry	High Top Property Contribution
Low Cost of Debt	High Top Tenant & Top 10 Tenants Contributions
High Unsecured Debt %	Low Property Yield
Well Spread Debt Maturity	Non-Compeititve Management Fees
Low Top Geographical Contribution	Low Distribution on Capital
	Low Distribution Margin
	DPU Downtrend
	NAV per Unit Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

The performance of 2H has improved as compared to 1H due to gradual recovery from COVID-19. There are positive updates that would benefit FHT performance, namely: VTLs in Singapore effective 8 Sep; end of lockdown in Sydney on 11 Oct and Melbourne on 22 Oct; end of lockdown rules in U.K.; lifted of state of emergency in Japan effective 1 Oct; inter-state travel from 11 Oct in Malaysia. However, DPS (from operation) would be reduced after the divestment of Sofitel Sydney Wentworth until FHT acquire another property with a similar amount size. For retention, there is a remaining S$ 3.9 million retentions left, equivalent to 0.2024 cents.

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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 and 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.