Melbourne property, better overall performance lift Frasers Hospitality's Q4 distributable income, DPS

FRASERS Hospitality Trust (FHT), a stapled group comprising Frasers Hospitality Real Estate Investment Trust (FH Reit) and Frasers Hospitality Business Trust (FHBT), on Friday reported a higher distributable income on the back of the addition of Novotel Melbourne on Collins, and better performance from all country portfolios except Singapore and Japan.

Distributable income in the fourth quarter went up 8.5 per cent year on year to S$23.8 million, boosted by the Australia, United Kingdom, Malaysia and Germany portfolios.

Correspondingly, distribution per stapled security or DPS for the three months ended Sept 30 rose 7.2 per cent to 1.2763 cents.

Net property income in Q4 came in at S$31.5 million, up 9.8 per cent, while revenue climbed 24.2 per cent to S$41.6 million.

FHT's managers said in a filing to the bourse operator that the Australia portfolio in Q4 recorded significant year-on-year increases in gross operating revenue and gross operating profit. But the average revenue per available room (RevPAR) for the portfolio declined 4.9 per cent as refurbishment works on Novotel Rockford Darling Harbour peaked in August and September 2017, affecting the overall portfolio occupancy.

In Singapore, the gross operating revenue and gross operating profit dipped in Q4. InterContinental Singapore achieved higher RevPAR on the back of occupancy gains which was offset by a fall in banquet revenue. Fraser Suites Singapore turned in lower gross operating revenue and gross operating profit in the quarter due to continued downward pressure on the average daily rate (ADR).

Led by an improvement in market sentiment, the performance of the UK portfolio improved. Higher ADR and occupancy contributed to the 6.4 per cent year-on-year growth in RevPAR for the quarter. While the portfolio performance has improved, FHT's managers said that gross operating profit growth remains under pressure due to higher costs arising from the increase in minimum wage rates.

They added that lower banquet revenue from weddings dented the performance of ANA Crowne Plaza Kobe in Japan, while the Kuala Lumpur market continued its strong growth.

For the full year, FHT's distributable income rose 10 per cent year on year to S$93.5 million.

Eu Chin Fen, chief executive officer of the managers, said: "Overall, our portfolio performance has been resilient, underpinned by the addition of Novotel Melbourne on Collins and Maritim Hotel Dresden. All country portfolios recorded higher gross operating profit except for Singapore which reported flat growth despite soft market conditions and new supply."

But DPS in FY2017 came in 3.5 per cent lower at 5.0458 cents due to the enlarged stapled security base post-rights issue.

Net property income for the year was up 15.3 per cent at S$120.2 million, while revenue rose 28.4 per cent to S$158.7 million.

As at end September, FHT's total debt was S$810.9 million, with gearing at 32.1 per cent and the weighted average years to maturity at 2.07 years. The proportion of fixed-rate debt to total debt was 74.7 per cent while the effective cost of debt was 2.6 per cent per annum. Interest cover was 5.09 times and net asset value per stapled security was 81.59 cents.

A DPS of 2.5137 cents has been declared and will be paid on Dec 29.

The managers said that the tourism outlook in Australia, the UK, Japan and Germany are expected to be upbeat. In Singapore, while the pressure on hotel trading performance remains in 2017 due to new supply, it is expected to ease as the pipeline of new hotel projects going forward suggests substantially slower supply growth. Over in Malaysia, the managers said that while hotel trading performance in Kuala Lumpur has improved, significant new supply over the next few years is likely to maintain pressure on room rates.

The stock closed down half a cent to S$0.775 before results were released.