Frasers Hospitality Trust - DBS Research 2016-04-05: Acquisitions to drive growth

Frasers Hospitality Trust - DBS Research 2016-04-05: Acquisitions to drive growth FRASERS HOSPITALITY TRUST ACV.SI 

Frasers Hospitality Trust - Acquisitions to drive growth 


Strength in diversity. 

  • We maintain our BUY call on FHT with a TP of S$0.83. 
  • While investors should be concerned about its exposure to the Singapore market, we believe investors have overlooked the fact that the majority of the FHT’s portfolio (c.60%) is located in markets which are experiencing tailwinds. 
  • In addition, FHT’s core Singapore asset, InterContinental Hotel is about to complete its extensive renovations (end-Feb-16), which should allow the property to outperform the overall Singapore market. 

Exposure to growing markets. 

  • Approximately 50% of FHT’s 1Q16 NPI was sourced from the growing markets of Australia (32%) and Japan (16%). FHT’s Australian and Japanese properties are beneficiaries of growing foreign tourists. 
  • In fact, FHT's recent purchase of Sofitel Sydney Wentworth deepens its exposure to the growing Sydney hospitality market. 

Clear and visible acquisition pipeline.

  • Through the strong support of its sponsor (Frasers Centrepoint Limited) and strategic partner (TCC Group), FHT has a clear and visible acquisition pipeline. This robust pipeline consists of 17 hotels and serviced residences located across Asia, Australia and Europe. 

Valuation: 

  • Maintain BUY, TP of S$0.83 based on DCF. 
  • Stock offers a total return of 11%, supported by a high yield of 7.3%. 

Key Risks to Our View: 

  • FX volatility. A key risk to our positive outlook is a significantly weaker AUD, MYR, JPY and GBP as Australia, Malaysia, Japan and UK contributes c.78% of FHT’s NPI.



Mervin Song CFA DBS Vickers | Derek Tan DBS Vickers | http://www.dbsvickers.com/ 2016-04-05
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.83 Same 0.83


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