FHT's Q1 DPS gets a lift from Sofitel Sydney

Singapore

FRASERS Hospitality Trust (FHT) reported a distribution per stapled security (DPS) of 1.72 cents for the first quarter ended Dec 31, 2015, bolstered by full contribution from Sofitel Sydney Wentworth which was acquired in July 2015.

This represented a 7.5 per cent increase from an estimated DPS of 1.6 cents for the same period last year based on a pro-rata basis for comparative purpose. FHT had reported its financials for an actual 171-day period from July 14 to Dec 31, 2014.

FHT achieved an estimated 16.2 per cent growth in gross revenue to S$31.38 million and an estimated 16.9 per cent increase in net property income (NPI) to S$26.33 million for the fiscal first quarter, on the back of sterling performance by its Japan and Australian properties.

In Kobe, gross revenue increased 15.3 per cent to 418.7 million yen (S$5 million) while NPI was 9.8 per cent higher at 353.9 million yen, as travel demand to Kobe was buoyed by the weaker Japanese yen.

In Sydney, demand for accommodation was supported by prominent corporate and leisure events such as the Telstra Rugby Finals, Australian Masters (golf), and Sydney International Art Series during the quarter. The full contribution of Sofitel Sydney Wentworth boosted the gross revenue and NPI of the Australia properties to A$9.6 million (S$9.7 million) and A$8.5 million respectively. Even if Sofitel's contribution was excluded, the gross revenue and NPI of the Australian portfolio would have risen 28 per cent and 32 per cent respectively from the comparative period.

The Westin Kuala Lumpur registered a 5.3 per cent increase in gross revenue and 3.8 per cent rise in NPI during the quarter compared to the comparative year-ago period.

Eu Chin Fen, CEO of the Reit manager, noted that the results were commendable in view of challenging operating conditions in some markets.

FHT's diversified portfolio allowed it to ride out challenges in other weaker markets, she said. "With the strong asset pipeline from our sponsor, Frasers Centrepoint Limited, as well as the flexibility to source for third-party hospitality assets, we will continue to look for suitable acquisition opportunities."

Gross revenue and NPI of the Singapore portfolio comprising InterContinental Singapore and Fraser Suites Singapore slipped 16.5 per cent and 19.5 per cent respectively due to the on-going renovation at InterContinental hotel. The hotel achieved an occupancy of 87 per cent based on available room inventory.

FHT's UK properties marked a 8.3 per cent and 9.8 per cent fall in gross revenue and NPI respectively. Its Reit manager attributed this to "seasonality" and the impact of the Paris attacks in mid-November 2015, which led to cancellation of bookings and a drop in occupancy in the London properties in November and December.

As at Dec 31, 2015, total debt stood at S$791.7 million while fixed-rate debt increased to 87.9 per cent from 73 per cent of total debt as at Sept 30, 2015. FHT has hedged all anticipated foreign currency exposure in respect of net distribution income at least six months forward.

The Reit manager said the hospitality operating environment in Singapore and Malaysia is expected to remain competitive with the increased room supply this year.

But Japan's Kobe is slated to benefit from the new Kansai airport extension which is targeted to complete by 2017 while Australia's weaker currency and Sydney's growth as a major international cruise destination are expected to benefit hotels in Sydney.