Frasers Property’s (SGX:TQ5) second attempt to privatise Frasers Hospitality Trust (FHT) (SGX:ACV) may offer minority investors a financially reasonable exit — but it does little to solve the strategic conundrum faced by the property group itself.
The proposed S$0.71 per stapled security offer, announced this month, comes after a failed 2022 bid at S$0.70. This time, Frasers Property is sweetening the deal with a 10.7% premium to FHT’s March NAV and up to 36.3% above the 12-month volume-weighted average price. The deal would give FHT unitholders a second chance to exit at a time when the hospitality REIT has struggled to generate meaningful DPS (distribution per stapled security) growth.
While minority securityholders of FHT are expected to welcome this offer, Frasers Property’s own investors — particularly minorities — may view the move with less enthusiasm.
🧮 A Costly Pursuit Amid Weak Fundamentals
Frasers Property has a net debt of S$15.1 billion, with a high net debt-to-equity ratio of 88.5% as at March 2025. With macroeconomic pressures mounting and borrowing costs elevated, questions arise:
Why deepen exposure to a hospitality trust facing cost inflation, currency risks, and inconsistent returns?
Adding to the complexity, FHT’s net property income fell 2.5% year-on-year in the first half of FY2025, due to rising taxes, utility costs, and other expenses. Meanwhile, DPS fell 6% year-on-year. While RevPAR (revenue per available room) has returned to pre-Covid levels, it hasn’t translated into higher income for unitholders.
Frasers Property itself trades at a massive 66% discount to NAV, with its share price significantly underperforming. And yet, it’s offering a premium for FHT’s assets — which some might say the market already devalues when pricing Frasers Property’s stock.
🏨 Rethinking How to Hold Hospitality Assets
The more strategic question is whether listed REITs remain the best vehicle for hospitality holdings. Private funds may offer richer valuations and more capital efficiency. Frasers Property might find better results by packaging hospitality assets into a private fund, retaining a minority interest and management rights. This would lighten its balance sheet, generate fee income, and potentially improve returns on equity.
Recent moves suggest this pivot is possible. The group has already sold assets like Capri by Fraser in Barcelona and Fraser Residence River Promenade in Singapore — the latter fetching S$140.9 million in 2023 from Tuan Sing Holdings.
🧩 Should Frasers Property Conduct Its Own Strategic Review?
Frasers Property is a sponsor to multiple listed REITs, including Frasers Centrepoint Trust (SGX:J69U) and Frasers Logistics & Commercial Trust (SGX:BUOU). While one trades closer to NAV, the other is heavily discounted — again raising the issue of public listing value.
With just 11% public float, and 86.9% held by TCC Assets (linked to Thai billionaire Charoen Sirivadhanabhakdi), privatisation of Frasers Property itself might not be far-fetched.
At the very least, the board should emulate FHT’s strategic review. A transparent reassessment could lead to better capital allocation, asset monetisation, or even a future delisting — all viable options to bridge the valuation gap and unlock shareholder value.
🧠The Bigger Picture for SGX
As privatisations and delistings accelerate, there’s concern about the vibrancy of Singapore’s equity markets. If assets continually exit the public arena due to undervaluation, it highlights systemic issues in investor engagement, liquidity, and overall market appeal.
Still, minority investors are unlikely to oppose well-priced exits. The concern lies more with what comes next — for Frasers Property, FHT, and Singapore’s broader listed REIT ecosystem.
Bottom Line:
While the S$0.71 offer may benefit FHT’s unitholders, Frasers Property must now justify the acquisition to its own shareholders — and present a clear, value-creating strategy for its hospitality portfolio. Without it, questions over capital efficiency, balance sheet health, and long-term direction will only grow louder.
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