Frasers Hospitality Trust Financial Report Analysis – Net Profit Decline

Business Description

Frasers Hospitality Trust (FHT) is a global hotel and serviced residence trust listed on the SGX-ST. It comprises Frasers Hospitality Real Estate Investment Trust (FH-REIT) and Frasers Hospitality Business Trust (FH-BT). FHT invests in income-producing real estate assets used predominantly for hospitality purposes. The portfolio includes 14 quality assets in prime locations across nine key cities in Asia, Australia, and Europe, valued at approximately S\$2.0 billion as of 30 September 2024.

Industry Position and Competitors

FHT operates within the global hospitality industry. It faces competition from other hospitality trusts and property investment companies. Its competitors include Ascott Residence Trust and CDL Hospitality Trusts, among others. FHT’s market share is supported by its diversified portfolio across major cities and the recent addition of Koto no Hako in Japan.

Revenue Streams and Customer Base

FHT’s revenue streams primarily come from its hospitality properties, including hotels and serviced residences. Its customer base includes international tourists and business travelers. FHT’s supply chain involves property management and hospitality services. Its competitive advantage lies in its strategic locations and diversified portfolio.

Financial Statement Analysis

Income Statement

For FY2024, FHT reported a gross revenue of S\$132.5 million, up 7.6% year-on-year. However, net property income (NPI) increased only by 2.1% to S\$92.5 million due to higher property taxes and expenses. Income available for distribution (DI) declined by 7.5% to S\$48.3 million, affected by increased finance costs and taxes. The distribution per stapled security (DPS) decreased by 7.5% to 2.2592 cents.

Balance Sheet

As of 30 September 2024, FHT’s portfolio valuation stood at approximately S\$2.0 billion, a 2.9% year-on-year increase. The net asset value per stapled security was S\$0.6574, down by 1.0%. The gearing ratio was 34.9%, with a weighted average debt maturity of 2.1 years. The effective cost of borrowing increased to 3.5% per annum.

Cash Flow Statement

FHT maintained ample liquidity to meet operational needs and financial commitments. The interest coverage ratio was 3.0 times, with 71.1% of total borrowings on fixed rates.

Key Findings

• Gross revenue increased by 7.6% year-on-year.
• Net property income rose by 2.1% year-on-year.
• Income available for distribution and DPS declined by 7.5% year-on-year due to higher finance costs and taxes.
• FHT’s portfolio valuation increased by 2.9% year-on-year.
• Net asset value per stapled security decreased by 1.0% to S\$0.6574.
• Effective borrowing costs increased to 3.5% per annum.

Special Activities

FHT has focused on capital management and operational efficiency to enhance resilience and competitiveness. It remains committed to integrating sustainability into its business for long-term success.

Investor Recommendations

If Currently Holding the Stock

Investors holding FHT stock should consider holding their position. Despite the challenges posed by higher borrowing costs and taxes, the trust’s diversified portfolio and strategic locations offer long-term value.

If Not Currently Holding the Stock

Potential investors might consider a cautious approach due to the recent decline in income available for distribution and DPS. However, the trust’s strong portfolio and recovery in key markets could present a buying opportunity for long-term growth.

Report Information

Date of Report: 12 November 2024

Financial Year: FY2024

Disclaimer

The analysis and recommendations provided are based on the financial report and are not investment advice. Investors should perform their own research and consider their financial situation before making any investment decisions.