SINGAPORE (Oct 29): DBS Group Research is maintaining Frasers Hospitality Trust (FHT) at “buy” its portfolio of quality hotels is hard to replicate at its current trading yield.
FHT is also in a strong position to pursue acquisition opportunities as its gearing stands at 33-34% while the stock is trading at a high forward yield of 6.9% and at a discount to book with most of the risks factored in.
In a Monday report, lead analyst Mervin Song says DPU-accretive acquisitions would be the next re-rating catalyst for FHT given it has a successful acquisition track record shown by the purchase of Sofitel Sydney Wentworth and Novotel Melbourne.
To recap, FY18 was a challenging year with DPU falling 5.6% y-o-y. However, DBS is more bullish on the potential recovery in FY19 as it expects the recovery in the Singapore hotel market to gather steam, the absence of one-off events such as two typhoons affecting FHT’s Kobe property and boost from AEIs such as the recently refurbished Novotel Sydney Darling Square.
Frasers Hospitality Trust declares 4.8% lower 4Q DPS of 1.2154 cents
After incorporating the impact of a weaker AUD, DBS is lowering its DCF-based target price to $0.78 from $0.80 previously.
As at 4.46pm, units in FHT are trading at 70 cents giving it an FY19F yield of 6.9%.
