Frasers Hospitality Trust - UOB Kay Hian 2017-10-30: 4QFY17 FHT In Line

FRASERS HOSPITALITY TRUST ACV.SI

Frasers Hospitality Trust - 4QFY17 FHT (In Line)

CDL Hospitality Trust (CDREIT), Suntec REIT (Suntec) and Frasers Hospitality Trust (FHT) have reported their latest quarterly results.

Results in line with expectations; maintain BUY with a raised target of S$0.85 (from S$0.80). This is based on two-stage DDM (required rate of return: 8.3% and terminal growth rate: 2.3%).
4QFY17 gross revenue and net property income grew 24.2% and 9.8% yoy respectively, after the addition of Novotel Melbourne on Collins and better performance across all country portfolios, except for Singapore and Japan. 4QFY17 DPU of 1.2763 S cents was up 7.2% yoy. However, FY17 DPU was 3.5% lower yoy, due to the enlarged stapled security base post-rights issue.
The results were in line with expectations, with FY17 DPU representing 99.0% of our full-year forecast.

Australia portfolio affected by refurbishment works on Novotel Rockford Darling Harbour which peaked in August and Sep 17, resulting in Australia portfolio RevPAR declining 4.9% in 4QFY17.
Management expects its Sydney properties to continue to see strong performance on the back of strong corporate demand, inbound tourism growth and busy events calendar, but Melbourne to face subdued occupancy due to more room supply.

Fraser Suites continued to face downward pressure on average daily rate, while InterContinental Singapore achieved higher RevPAR on higher occupancy that was offset by a decline in banquet revenue.
Management expects slower supply growth (and easing of competitive pressure) based on the pipeline of new hotel projects ahead.

In the UK, RevPAR was up 6.4% yoy, due to higher ADR and occupancy on the back of improved market sentiment.
The Japanese portfolio saw stable room revenue yoy, which FHT intends to focus on increasing, as well as revenue from local and international conferences and event.
Meanwhile, Malaysia’s RevPAR grew 15.7% yoy, on the back of stronger transient and corporate demand contributing to higher occupancy.

Gearing declined to 32.1% (down by 1.3ppt qoq), although borrowing costs remained at 2.6%, flat qoq.

Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-10-30

UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.850 Up 0.800