Brokers’ take: Maybank recommends investors accept FHT privatisation offer

STAPLED securityholders of Frasers Hospitality Trust : ACV 0% (FHT) should accept the privatisation offer from Frasers Property : TQ5 0% as it provides an attractive exit valuation, Maybank said.

In a report on Monday (Jun 13), analyst Chua Su Tye noted that the offer consideration of S$0.70 per stapled security already factors in recovery prospects for the real estate investment trust (Reit).

The offer values FHT at 1.07 times its price to net asset value. This is compared to FHT’s 0.86 times average multiple since its initial public offering, 0.9 times its peers and 1.04 times for precedent privatisation of Singapore Reits (S-Reits). The consideration is also 27 per cent higher than Maybank’s target price on the counter at S$0.55, and should allow stapled securityholders to exit at a premium of between 6 and 52 per cent, the analyst said.

Chua noted an uneven recovery trajectory for the hospitality Reit’s distribution per stapled security amid rising macro headwinds.

He expects FHT’s growth trajectory for its revenue per available room will remain uneven, with opening borders adding tailwinds to demand recovery.

He also expects the lack of scale for FHT – which is among the smallest S-Reits by market capitalisation – will likely limit acquisition growth opportunities, while the counter’s low trading liquidity likely needs to climb over 4 times to be considered for index inclusion.

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Chua suggested stapled securityholders accept the offer and look for investment opportunities in other hospitality Reits instead.

He recommended CDL Hospitality Trust as the best proxy for the hospitality sector recovery, and Far East Hospitality Trust for its pure-play Singaporean assets.

Frasers Property Hospitality Trust Holdings, a wholly-owned subsidiary of Frasers Property, on Monday proposed to privatise FHT through a trust scheme of arrangement, in a deal that will shave over S$1.3 billion worth of value from the local bourse.

The offeror plans to acquire all of FHT’s stapled securities – other than those held by TCC Group Investments and Frasers Property and its subsidiaries – at a scheme consideration of S$0.70 each in cash.

In another report on Monday, CGS-CIMB analyst Lock Mun Yee noted that the transaction is in line with Frasers Property’s long-term strategy, and will allow the company to increase its investment in hospitality assets.

Frasers Property should also be able to leverage on its deep understanding of FHT’s assets and adopt a disciplined approach to drive performance, Lock said.

Stapled securities of FHT were trading at S$0.695 at 2.41 pm on Tuesday, up S$0.005 or 0.7 per cent.