Frasers Hospitality Trust - UOB Kay Hian 2017-01-27: 4Q16 Results Of FHT In Line

FRASERS HOSPITALITY TRUST ACV.SI

REITs − Singapore - 4Q16 Results Of CDREIT Above Expectations, FHT In Line

Frasers Hospitality Trust (FHT) saw DPU dilution from last October’s rights issue.
AEI completion at the Intercontinental Singapore saw RevPAR improve on higher occupancy.
Maintain BUY with a target price of S$0.74.

CDL Hospitality Trust (CDREIT) and Frasers Hospitality Trust (FHT) reported their latest quarterly results.

Results in line with expectations; maintain BUY with an unchanged target of S$0.74. This is based on two-stage DDM (required rate of return: 8.5% and terminal growth rate: 1.4%).
1QFY17 gross revenue and net property income grew 3.2% and 1.3% yoy respectively, after the acquisition of Novotel Melbourne and Maritim Hotel Dresden.
1QFY17 DPU fell 18.9% yoy, despite distributable income growth of 3.1% yoy, due to unit base expansion (+27.2% yoy) post FHT’s rights issue in Oct 16.
The results were line with expectations, with 1QFY17 DPU representing 26% of our full-year forecast.

The Australian portfolio (entirely in Sydney) turned in a robust performance, propped up by recently-acquired Novotel Melbourne on Collins.
Australia clocked in visitor arrival growth of 11.4% yoy in 9M16, with a 18.0% yoy increase in Chinese arrivals. Sydney hotels continue to be a beneficiary of both healthy leisure and corporate demand.

Full restoration of room inventory post AEI completion at the Intercontinental Singapore in end-Feb 16 saw 1QFY17 Singapore RevPAR improve on higher occupancy. However, we note that Fraser Suites registered lower RevPar on weaker demand from oil & gas (O&G) corporates.
Intercontinental Singapore could underpin further growth, with management previously noting that the asset has not reached optimal performance.

Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-01-27

UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.740 Same 0.740