9 Quick Things Investors Should Know About Frasers Hospitality Trust’s Latest Earnings

Last week, Frasers Hospitality Trust (SGX: ACV) — or FHT — released its 2018 second quarter (2Q 2018) earnings update. As a quick introduction, FHT 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.

Here are 9 things investors should know about FHT’s latest results:

  1. Gross revenue for the reporting quarter declined 3.1% to S$37.5 million while net property income fell by 4.0% to S$27.8 million.
  2. Similarly, the REIT’s distribution per stapled security (DPS) was down by 7.8% year-on-year to 1.1126 cents, mainly due to the lower income available for distribution.
  3. Based on FHT’s annualized DPS of 4.85 cents and its closing unit price of S$0.74 as of 27 April 2018, the REIT has a trailing distribution yield of 6.6%.
  4. As of 31 March 2018, the REIT’s gearing stood at 33.1%, which is a safe distance from the regulatory ceiling of 45%.
  5. The REIT’s average occupancy rate for Australia, Singapore, UK, Japan, Malaysia was 89.5%, 84.3%, 76.4%, 68.6% and 78.0%, respectively, for the quarter.
  6. All countries reported year-on-year declines in gross revenue, with the exception of Germany where gross revenue grew by 19.1%.
  7. Gross operating profit was up in Japan and Germany, down in Australia, UK and Malaysia and flat in Singapore, on a year-on-year basis.
  8. The average daily rate (ADR) was up year-on-year for Australia, Singapore and Japan whilst UK saw flattish ADR. Malaysia, on the other hand, saw ADR down from RM 526 to RM 482.
  9. Here are some comments from the REIT on its outlook in the top four markets:

Australia: For the first two months of 2018, international arrivals rose 7.0% yoy.

Sydney’s hotel trading metrics is expected to continue to thrive. Stable occupancy and anticipated increase in ADR are likely to push RevPAR upwards. Although a relatively large number of new rooms is anticipated to enter the market over the next three years, continued strong demand is expected to offset the supply increase.

Melbourne has recorded higher international visitor growth but the hotels have struggled to raise rates without impacting occupancy. With an influx of new supply in 2018 and 2019, the challenge to increase room rates is anticipated to persist in the near to medium term.

Singapore: In the near term, hotel demand is expected to continue rising on the back of strong visitor arrivals growth. Limited hotel supply in 2018 should provide some respite for the market and reduce pressure on ADR and occupancy rates.

United Kingdom: While the softening of the British pound has boosted hotel trading performance in 2017, modest growth is expected in 2018, albeit at a slower rate than last year. The headwinds of rising costs in operational expenses, payroll and business rates highlight the challenges ahead for the industry, at a time of heightened concerns with Brexit casting a shadow over the future of the UK economy and the free movement of labour.

Japan: For January to February 2018, the number of foreign visitors increased by 15.7% yoy. While growth of inbound tourism continues, supported by major events such as Rugby World Cup 2019 and 2020 Tokyo Olympic Games, high supply levels may concern hoteliers. But new regulations on minpaku (home-sharing type of accommodation) and strong demand fundamentals could mitigate the negative impact of heightened competition.”

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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.