Frasers Hospitality Trust

Frasers Hospitality Trust: Frasers Hospitality Trust (FHT) 2H14 (14 Jul - 31 Dec) distributable income and DPU both beat IPO forecasts by 5.3%, to $35.7m and 2.97¢, respectively, attributed to lower-than-expected expenses and interest costs. Gross revenue of $50.2m came in line, while NPI outperformed by 2.3% from stronger performances of hotels in Australia, Japan and UK, but partially offset by Malaysia's The Westin Kuala Lumpur due to recent aviation mishaps. In terms of contribution from its 12 properties, FHT's NPI was derived from Singapore (33%), UK (26%), Japan (16%), Australia (14%) and Malaysia (11%). Coming up in Apr 2015 till Feb 2016, FHT has scheduled an AEI for InterContinental Singapore to boost future returns. Management expects Singapore’s hospitality industry to be facing headwinds with increasing supply of hotel rooms by end 2015, but noted that occupancy levels should be held steady, supported by the 5-7% growth in tourist arrivals. Aggregate leverage of 40.0% is at the higher end compared to other hospitality peers, with average interest cost of 1.8% and debt tenor of 4.0 years. At $0.90, we reckon that FHT is fairly valued at 1.05x P/B with an indicative yield of 7.1%, compared to peers' average of 0.95x P/B and yield of 7%.