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Frasers Hospitality Trust Reports Lower Distributions Again

The challenging operating environment continued to weigh heavily on Frasers Hospitality Trust‘s (SGX: ACV) financials. Distribution per security (DPS) declined 4.3%, with weaker performance in the company’s Malaysia and Japan portfolios. Here’s a breakdown of a few key metrics from the last quarter.

The numbers:

Data source: Frasers Hospitality Trust FY19 Q1 Press Release

What happened

The decline in all of Frasers’ key operating financials was mostly due to lower revenue at Westin Kuala Lumpur and ANA Crowne Plaza Kobe in Japan. In contrast, its Australian and United Kingdom portfolio showed year-on-year growth in local currency terms. In Australia, gross operating revenue (GOR) and net property income (NPI) rose 6.3% and 7.3%, respectively. GOR and NPI at Frasers’ U.K. portfolio increased by 9.3% and 8.1%, respectively.

However, the manager did not reveal how foreign currency fluctuations affected earnings this quarter.

The company’s Singapore portfolio, which consists of InterContinental Singapore and Frasers Suites, remained stable. The chart below shows the revenue and NPI contribution from its various operating territories.

Source: Frasers Hospitality Trust FY19 Q1 Earnings Presentation

Financial position

  • As of 31 December 2018, Frasers’ gearing stood at 34.4%
  • Interest cover stands at 5.3 times
  • The average debt to maturity is 2.65 years
  • 73.5% of the company’s debt is on fixed rates

As it stands, the trust’s gearing is well below the 45% regulatory cap, and it has about S$264 million in debt headroom.

The company’s interest cover is also quite comfortable, giving the trust ample financial muscle to take on more debt for growth if it sees fit.

Looking ahead

Despite improvements in operating metrics down under, the challenging hospitality scene is expected to continue in 2019. New hotel openings in Sydney and Melbourne will put pressure on existing hotels.

The Singapore hospitality scene looks likely to improve, with the Singapore Tourism Board expecting growth in visitor arrivals to offset potential supply-side pressures.

The Foolish bottom line

It was another disappointing quarter for Frasers Hospitality Trust as DPS again declined. Despite better-than-expected results in its Australian portfolio, other markets have floundered this quarter. The strength of the Singapore dollar also remains a problem as most of the trust’s revenue comes from other markets. With Australia experiencing a supply glut, and about 42% of its revenue coming from Australia, the trust may continue to face headwinds in future quarters.

At the time of writing, units of Frasers Hospitality Trust trade at S$0.73 per piece. This translates to a price-to-book ratio of 0.87 and a distribution yield of 6.57%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore contributor Jeremy Chia does not own shares in any company mentioned.