Frasers Hospitality Trust - UOB Kay Hian 2018-01-25: 1QFY18 Results In Line

Frasers Hospitality Trust - UOB Kay Hian 2018-01-25: 1QFY18 Results In Line FRASERS HOSPITALITY TRUST ACV.SI

Frasers Hospitality Trust - 1QFY18 Results In Line

  • Frasers Hospitality Trust (FHT) results were in line with expectations. 
  • Maintain BUY with a raised target price of S$0.90 (from S$0.85).
  • Maintain OVERWEIGHT on the sector.

Frasers Hospitality Trust (FHT SP/BUY/S$0.825/Target: S$0.90) 

Results in line with expectations; maintain BUY with a raised target price of S$0.90 (from S$0.85). 

  • This is based on a two-stage DDM (required rate of return: 8.0% and terminal growth rate: 2.5%). The raised target price factors mainly a 30bp reduction in required return to factor in the improved hospitality outlook for Australia and Singapore.
  • 1QFY18 gross revenue and net property income grew 4.8% and 3.1% y-o-y, due to better performances across all country portfolios, except for the UK. The results were in line with our expectations, with 1QFY18 DPU of 1.3107 S cents representing 25.8% of our full-year estimate.

Australia portfolio driven by Novotel Rockford, and the relaunch of NSDS soon.

  • The Novotel Sydney (NSDS) is set to complete its renovation by 31 Jan 18, and will see its franchise agreement with AccorHotels converted to a management agreement at lower fees. 
  • RevPAR for Sydney (excl.NRDH) and Melbourne improved 1% and 6.1% q-o-q. Its hotels in both cities are set to benefit from busy calendar events ahead, with Sydney in particular benefiting from the opening of the International Convention Centre.

Singapore performance led by InterContinental 

  • Singapore, which achieved higher RevPAR on higher occupancy and ADR, while Fraser Suites Singapore continued to face pressure on average daily rate. 
  • Management expects improvement in Singapore hotels, due to the limited new supply going forward and continued visitor arrivals growth.

International portfolio. 

  • In the UK, RevPAR was flat y-o-y, with the marginal increase in ADR offset by increase in occupancy. 
  • Japanese portfolio saw stable room revenue growth y-o-y, which FHT intends to focus on increasing, as well as revenue from local and international conferences and events. 
  • Meanwhile, Malaysia’s RevPAR declined marginally by 1.8% y-o-y, due to softer corporate demand.

Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | 2018-01-25
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.90 Up 0.850