FRASERS HOSPITALITY TRUST (SGX:ACV)
Frasers Hospitality Trust - Uneasy Recovery
RevPAR on a mend but demand visibility weak
- Frasers Hospitality Trust (SGX:ACV)’s 1H21 DPU (at -45.5% y-o-y and -83.8% h-o-h) was weak, with 60% of its distributions retained to conserve cash. Otherwise, DPU would be at ~28% of our FY21 estimates.
- Frasers Hospitality Trust's 1H21 revenue and NPI rose 53.8% h-o-h and 83.5% h-o-h mainly from a better performance of its Australia portfolio, which helped to mitigate weak RevPAR. We believe it is premature to revise (down) estimates, largely as recovery should pick up in 2H21, even as demand visibility remains low.
- Valuations at 0.8x P/B should offer support to our DDM-based S$0.50 target price (COE: 6.9%, LTG: 2.0%) for Frasers Hospitality Trust.
- We prefer Ascott Residence Trust (SGX:HMN) (target price S$1.25) for its diversified portfolio, concentrated long-stay assets and upside from capital distributions amid slower growth.
Singapore RevPAR expected to bottom out
- Frasers Hospitality Trust's Singapore portfolio (at ~36% of its AUM) saw its GOR (gross operating revenue) and GOP (gross operating profit) fall 42.4% y-o-y and 44.6% y-o-y. This was dragged by lower RevPAR, which fell 42.9% y-o-y, on weaker occupancy (72.5% to 56.0%), but which rose 8.7% h-o-h with improvement in ADR as the InterContinental ceased operations as an isolation facility in Sep 2020 to rely on staycation demand.
- We see staycation demand gaining traction in 2H21, largely due to shut borders, to further support its RevPARs.
Recovery likely in Australia and UK
- RevPAR for Frasers Hospitality Trust's Australia portfolio (~32% of AUM) fell 70.2% y-o-y, but jumped 48.1% h-o-h, led by better occupancy (33.8% to 40.5%) and ADRs. These were backed by additional isolation contracts at the Sofitel Sydney and Novotel Melbourne (from Oct 2020). We see improving demand and RevPAR, underpinned by a gradual return of domestic travel with the exit of lockdowns.
- UK occupancy was weak at 16.8% (from 14.5%) with closures from a third lockdown (on 5 Jan) and limited transient demand. GOR and GOP, up 12.6% h-o-h and 76.1% h-o-h, should see improvement in 2H21.
Balance sheet sound, deal catalysts low
- Frasers Hospitality Trust's balance sheet is sound; leverage was maintained at 37.7% at end-Mar 2021, with no borrowings due till FY22. While debt cost improved from 2.4% to 2.2%, interest cover is low at 1.5x, reflecting its weaker profitability profile, which should improve into the coming quarters.
- We are hopeful of acquisition catalysts, given its sponsor AUM, but see low visibility against weak demand and RevPAR recovery.
- See
Chua Su Tye
Maybank Kim Eng Research
|
https://www.maybank-ke.com.sg/
2021-05-03
SGX Stock
Analyst Report
0.50
UP
0.400
