Frasers Hospitality Trust (FHT) - UOB Kay Hian 2017-07-28: 3Q17 Results Of FHT In Line

Frasers Hospitality Trust (FHT) - UOB Kay Hian 2017-07-28: 3Q17 Results Of FHT (In Line) FRASERS HOSPITALITY TRUST ACV.SI

Frasers Hospitality Trust (FHT) - 3Q17 Results Of FHT (In Line)

  • Results of Frasers Hospitality Trust (FHT) is in line with our expectations. FHT is optimistic of its Australian and Japan portfolios while remaining cautious on Singapore and Malaysia portfolios. 
  • Maintain BUY and target price of S$0.80.



WHAT’S NEW


Results in line with expectations. Maintain BUY and target price of S$2.75, based on a two-stage DDM model (required rate of return: 8.5%; terminal growth rate: 2%).

  • Results were in line with expectations with 9M17 DPU accounting for 73.9% of our full-year estimate. 
  • 3Q17 gross revenue and NPI rose 22.6% and 8.5% yoy respectively on the back of the acquisition of Novotel Melbourne on Collins as well as better performances from Australia, the UK, Japan and Malaysia. 
  • Results were partly offset by softer performance in Singapore. 
  • 3Q17 DPU of 1.2374 S cents declined 18.2% yoy due to unit dilution from the Oct 16 rights issue.

Marginal changes to gearing and borrowing costs. 

  • 3QFY17 gearing reached 34.1% (2QFY17: 33.4%), while borrowing costs declined marginally to 2.5% (2QFY17: 2.6%).

Softer performance in Singapore. 

  • Only the Singapore portfolio saw a yoy drop in gross operating profit (-1.6%) during the quarter, mainly due to higher operating costs at InterContinental Singapore. This was despite a 4.1% yoy increase in Singapore RevPAR due to better occupancy at the InterContinental Singapore and increased revenue from F&B outlets. 
  • Although RevPAR for Fraser Suites Singapore grew, weakness in corporate demand continued. Management continues to seek out new accounts from the engineering, government and manufacturing industries.

International portfolio overview. 

  • The Australian portfolio’s RevPAR was unchanged yoy despite refurbishment works at Novotel Rockford Darling Harbour. 
  • Malaysia's RevPAR was up 11.3% yoy due to strong corporate and transient demand. Also, given the renovations at a competing hotel, occupancy rose 6.4ppt to 72%. 
  • In the UK, RevPAR was up 5.9% yoy on improved market sentiments. 
  • The Japanese portfolio saw RevPAR increase marginally by 2.9% yoy. Due to the strengthening of the Japanese yen, FHT’s Japanese property saw fewer international arrivals and spill-over traffic.

Management sees mixed outlook. 

  • FHT is optimistic of its Australian portfolio, with expectations that Sydney’s healthy performance will continue due to corporate demand and events. Management is similarly optimistic about Melbourne due to the city’s events calendar; however, there are slight concerns over the new supply pipeline. 
  • Management is much more cautious on Singapore and Malaysia, given the large hotel supply pipeline and increasing regional competition. Although more hotel rooms are due to open later in the year, management believes that absorption is sufficiently large. 
  • Management also holds a hopeful outlook for the Japanese portfolio, given that its hotel property is likely to benefit from spill-over traffic from the opening of Kansai Terminal 2.




Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-07-28
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.800 Same 0.800



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