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Frasers Hospitality Trust cuts Q3 DPS by 10.2% to 1.0086 S cents on softness Down Under

INTERNATIONAL hotel investor Frasers Hospitality Trust has cut its distribution per stapled security (DPS) for the third quarter to 1.0086 Singapore cents, as earnings declined.

DPS is down by 10.2 per cent year on year for the three months to June 30, the manager said in results released on Tuesday night, while blaming weakness in its Australian assets.

Net property income fell by 11 per cent to S$25.4 million, as gross revenue lost 8.4 per cent to S$35 million. Distributable income was down by 9 per cent to S$19.2 million.

The decline came on the back of lower revenue per available room (RevPAR) and occupancy in Australia, where Frasers Hospitality Trust has one hotel in Melbourne, as well as two hotels and serviced apartments in Sydney. Meanwhile, the trust notched revenue and operating profit growth in Britain, Japan and Malaysia, and reported a stable performance in Singapore.

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Colin Low, chief executive of the managers, said: “While most of our country portfolios recorded better year-on-year performance in this quarter, our Australia portfolio reported weaker room revenue on the back of continued pressure on rates and lower occupancy.

“In Sydney, the trading environment has remained challenging, and softer corporate demand has led to lower room revenue across our properties while in Melbourne, the performance of our property has been affected by fewer sporting events and concerts.”

Staff costs also rose in the Sydney properties, with expenses for outsourced housekeeping up at Novotel Sydney Darling Square and Sofitel Sydney Wentworth, the managers added.

Looking ahead, the managers noted that its Australian assets face RevPAR headwinds on a pipeline of new rooms in Sydney and Melbourne, while room stock and weaker corporate demand could put a crimp on occupancy and RevPAR growth in Britain, where the economy is also facing uncertainty from global trade tensions and Brexit.

Frasers Hospitality Trust - a stapled trust comprising Frasers Hospitality Real Estate Investment Trust and Frasers Hospitality Business Trust - owns 15 properties across Singapore, Australia, Britain, Japan, Malaysia and Germany. Gearing was 35 per cent as at June 30, with a weighted average debt maturity of 2.14 years.

Net property income for the nine months was down by 6.9 per cent, to S$81.6 million, on a 5.9 per cent slide in gross revenue, to S$110.3 million. DPS came in 8.4 per cent lower, at 3.2474 Singapore cents.

The counter lost S$0.01, or 1.40 per cent, to S$0.705, before the results were released.