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3 Things Frasers Hospitality Trust’s Management Wants You To Know About Its Business

In late January, Frasers Hospitality Trust  (SGX: ACV) released its first quarter earnings update for its fiscal year ending 30 September 2018 (FY2018). As a quick introduction, Frasers Hospitality Trust is a stapled trust that comprises a real estate investment trust and business trust. It focuses mainly on hotels and serviced residences around the world. Right now, its portfolio consists of 15 properties located across nine cities in Asia, Australia, and Europe.

The Manager of Frasers Hospitality Trust had given a presentation on the trust’s latest results. In the presentation deck, I saw three slides on the trust’s business that I think investors should pay attention to.

The first slide shows a high-level summary of Frasers Hospitality Trust’s income statement for the first quarter of FY2018:


Source: Frasers Hospitality Trust FY2018 first quarter earnings presentation

We can see that the trust had a mixed quarter. Gross revenue, net property income, and distribution income all increased. But, there was a decline in the distribution per stapled security (DPS).

The next slide I want to look at shows the revenue and operating profit numbers in the first quarter of FY2018 for the various countries that Frasers Hospitality Trust operates in:


Source: Frasers Hospitality Trust FY2018 first quarter earnings presentation

During the reporting quarter, most of the trust’s geographical markets delivered both year-on-year growth in gross operating revenue and operating profit.

UK stands out with a decline in both measures. Its weaker performance was mainly driven by overall weaker room revenue, as well as higher minimum wage rates. The trust expects pressure on the UK business to persist with the anticipation of a further increase in minimum wages.

The next slide I want to look at shows a geographical breakdown of Frasers Hospitality Trust’s gross revenue (GR) and net property income (NI) in the reporting quarter:


Source: Frasers Hospitality Trust FY2018 first quarter earnings presentation

We can observe that Frasers Hospitality Trust has a diversified business. The benefit of such diversification is that the trust does not rely on one single country for its income, which reduces the overall income concentration risk that it is facing.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.