Frasers Hospitality Trust (SGX: ACV) Is Trading Near Its All Time Low
Frasers Hospitality Trust (SGX: ACV) has recently announced its second-half 2020 financial results. It is trading at 3.25% dividend yield based on its last traded of $0.43 on 13 Nov.
Key Highlights:
Distribution per unit (DPU) and Dividend Yield (3.25%)
Price to book ratio (0.66)
Gearing (37.7%)
Portfolio Occupancy
Interest coverage ratio (2.3x)
Growth catalyst
Background of Frasers Hospitality Trust
Frasers Hospitality Trust is one of the largest international hospitality portfolios listed in Singapore. It manages a portfolio consists of nine hotels and six serviced residences located in prime locations in Asia, Australia and Europe.
The trust is structured as a stapled group comprising Frasers Hospitality Real Estate Investment Trust and Frasers Hospitality Business Trust. Its sponsor is Frasers Property Ltd (SGX: TQ5), a Singapore-listed property developer.
1. Distribution per unit and dividend yield
Its net property income in 2H2020 tumbled 73.7% to $14.6m. This was mainly due to the global travel severely impacted by the pandemic, which affected its room occupancies across all its portfolio.
Based on its latest price, the REIT is currently trading at about 3.25% dividend yield. Historically, the REIT's DPU has been declining in the past 5 years. The average yield was 8.25%.
2. Price to book ratio
Over the past 5 years, Frasers Hospitality Trust has been trading at an average price to book ratio of 0.92. The recent price correction has brought down the ratio to 0.66, indicating a 30% discount based on its historical valuation.
3. Gearing
Portfolio leverage remains conservative at 37.7%, with a weighted debt maturity of 3.62 years.
4. Portfolio Occupancy
The portfolio occupancy is severely impacted by the Covid-19. Some of the properties are still temporarily closed due to the pandemic and to conserve cash during this period. However, excluding Singapore and Malaysia, portfolio occupancy starts to stabilised in Australia, UK and Japan.
5. Interest coverage ratio
Aims Apac REIT has a low interest coverage ratio of 2.3 times, which is way below our preference of 4 times. The REIT maintains an interest cost of 2.3%, 74.9% of its debt are under fixed rate.
6. Growth Catalyst
The REIT manager expects a faster recovery its Australia, Japan and UK, contributed by a rebound in domestic tourism. However, the risk due to the Covid-19 outbreak continues to weigh on its portfolio performance. Industry experts anticipate that the travel demand and consumer confidence will take between 2.5-4 years to recover to 2019 levels.
Summary
The low occupancy rate across the hospitality segment is likely to continue for the next 2 quarters. The REIT does not look attractive due to the market condition as DPU will continue to be impacted in the near future.
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