Frasers Hospitality Trust - UOB Kay Hian 2016-01-29: Results in line with expectations

Frasers Hospitality Trust - UOB Kay Hian 2016-01-29: Results in line with expectations FRASERS HOSPITALITY TRUST FHT ACV.SI 

Frasers Hospitality Trust (FHT SP) - Results in line with expectations

 Results in line with expectations; maintain BUY 

  • ... and target price of S$0.97 based on two-stage dividend discount model (required rate of return: 8.2% and terminal growth rate: 1.6%). 
  • Frasers Hospitality Trust (FHT) reported 1QFY16 DPU of 1.72 cents, up 7.5% yoy. 
  • Both gross revenue and NPI grew 16.2% yoy and 16.9% respectively, attributable to contributions from newly-acquired Sofitel Wentworth and the Australian portfolio, as well as Japan. 
  • Excluding the payment top-up at Intercontinental Singapore, core DPU amounted to 99.2% of our estimates. 

 Operational highlights. 

  • Australia registered RevPAR growth of 16% qoq, bolstered by higher occupancy and ADR. 
  • The Singapore portfolio saw RevPAR decline 6.8% qoq, with average occupancy at 74.5%. 
  • In the UK, RevPAR declined 14.1% qoq. Gearing remained relatively stable at 38.8% (38.9% in 4QFY15), while borrowing costs increased 20bp qoq to reach 2.6%. 

 Short-term pain in Singapore and the UK propped up by growth in Australia and Japan. 

  • The weak performance of the Singapore portfolio was attributed to the disruption by the ongoing AEI at Intercontinental Singapore. 
  • Bolstered by the recent Sofitel acquisition, the Australian portfolio registered stellar growth, propped up by a buzzing events calendar. 
  • The UK portfolio turned in a weaker set of results, as bookings were cancelled due to the Paris attacks in Nov 15. 
  • ANA Crowne Plaza Kobe registered healthy NPI growth of 10%, as tourist arrivals in Japan reached a record high of 19.7m. 
  • Management remains cautious on Malaysia as visitor arrivals have slowed, coupled with weak corporate demand from the lacklustre oil and gas segment. 

 Intercontinental looking to contribute post its facelift. 

  • The ongoing AEI at Intercontinental Singapore (S$26m), which commenced in April is scheduled for completion next month, with management targeting ADR at S$350. 
  • Management has hinted at redeveloping Novotel Rockford, in Australia, next. 
  • We reckon the potential AEI could see fruition by end-16 or 1H17, to coincide with the completed redevelopment works at the neighbouring Sydney Convention Center.

Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2016-01-29
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.97 Same 0.97