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

Last week, Frasers Hospitality Trust (SGX: ACV) released its second 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 REIT’s latest results. In the presentation deck, I saw three slides on the REIT’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 second quarter of FY2018:

Source: Frasers Hospitality Trust FY0218 second quarter earnings presentation

We can see that the trust had a poor quarter. Gross revenue, net property income, distribution income, and distribution per stapled security all declined year-on-year. The trust had suffered from a weak performance across most of its portfolio.

This brings me to the next slide I want to look at, which shows the performance of each of the trust’s geographical markets:

Source: Frasers Hospitality Trust FY0218 second quarter earnings presentation

We can see that all countries, with the exception of Germany, experienced a year-on-year decline in gross operating revenue.

Frasers Hospitality Trust said that the weaker performance in Australia and UK were due to lower occupancy rates, while the lower revenue in Malaysia was because of lower average daily rates.

The last slide I want to talk about illustrates the contributions of each geographical market toward Frasers Hospitality Trust:

Source: Frasers Hospitality Trust FY0218 second quarter earnings presentation

We can observe that Frasers Hospitality Trust has a reasonable level of geographical diversification in terms of both its gross revenue and net property income. The benefit of having such diversification is that the trust does not have to rely on one single country for its income, which thus reduces concentration risk.

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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.