Sunday, 29 June 2014

Frasers Hospitality Trust



Frasers Hospitality Trust ("FHT" or the "Trust") is offering approximately 182,099,000 stapled securities at Singapore 88 cents each. FHT can be considered as a late comer to the game with many listed peers already listed on SGX. They didn't even bother to "book-build" a price range, as such, investors like you and me will not be able to "gauge" the pricing demand. The market cap will be around S$1.05b








The IPO will start on 1 July 2014 and ends on 10 July 2014 12pm. It will start trading on 14 July 2014 at 2pm.

The reason why i took so long to analyze this counter is frankly because it is too boring... not another Hospitality Trust please....as such, i will try to make it as simple as possible for you to make a decision. 

According to the preliminary prospectus, there will be 136.645m placement units and 45.454m public units. There will be sufficient for most people, so don't have to be too "kan cheong" that you will not get them.

Initial Portfolio

The initial portfolio consists of 6 hotels and 6 serviced residences.


Just take a look at the portfolio and decide for yourself if you like those properties located in those cities. 

The properties are not running at full occupancy, in this regard, there could be some upside should the management find ways to up the occupancy rate.

Over-allotment

There will be an over-allotment option of around 35.6m units in case of "overwhelming" demand. Retail investors would be better off should such over-allotment be exercised so as to create some price support on its debut.

Distribution

There will be semi-annual distributions for periods ending 31 March and 30 Sep each year.

Financial


The distribution yield is around 7% after top-up and drops to 6.5% should the top-up be removed.

Cornerstone Investors

Cornerstone investors took in around 232.949m units. The cornerstone investors are 
  • DBS and DBS private bank
  • Fortress Capital
  • Metro Holdings Ltd
  • Family office of SingHaiYi and Shanghai Summit.

What I like about FHT
  • The sponsor and it associate will continue to hold 65% of FHT post IPO (assuming over-allotment is not exercised). This creates alignment of interest.
  • Experienced board and management team
  • Downside protection through Master Lease and Tenancy Agreement coupled with Sponsor's corporate guarantee
  • A good pipeline of acquisition properties from the Sponsor
  • Long leasehold period and further upside if occupancy improves

My Concerns
  • The properties are spread all over the globe and some are not in key cities (e.g Kobe, Glasslow). In addition, it is a mix bag of luxury, upscale and budget types accommodation. While this may create diversification, there is frankly no synergies for joint marketing among the properties.
  • Currencies exposure vis-a-vis the SGD payout.
  • Income support from "payment top up arrangement". What happens when those support is withdrawn subsequently when the lease expires?
  • Over supply of such type of trust
Listed Peers

According to REIT Data, the peers are trading as follows:


Assuming a fair trading range of between 6.5%-7.5%, the price will trade between 82-95c. 

My gut feel is that given the relatively large float and the lacklustre performance of hospitality trust over the last few months, i believe the upside, if any, is probably limited to a few cents. This is after all, a yield play.

I will give it a one chilli rating. Buy only if you like this trust and believe it will debut between 86-91c on the first day.

Happy IPOing.

15 comments:

Anonymous said...

One more thing to note is that the cornerstone investors are not subjected to any lockup period.

Mr. IPO said...

Thanks for that note. I didn't pick that up.

Anonymous said...

This is a RED HOT IPO!

http://www.channelnewsasia.com/news/business/singapore/frasers-hospitality-share/1222920.html

The hotels and serviced residences real estate investment trust (REIT) said its international placement of 139.6 million stapled securities at S$0.88 apiece attracted interests valued around S$2.5 billion - which translates to a subscription rate of around 21 times.

Mr. IPO said...

Hahaha yah. Quite impressive. Let me dig more and see if can upgrade my ratings. ^_^

michale wong said...

The visit was very useful for me. because i had got very important and attractive information about SGX Singapore and your content is really very good.

CarlJ said...

Market cap should be S$1.06bn based on S$0.88/share and 1.2bn shares on listing. I think your S$1.7bn market cap is total capitalisation including the S$0.7bn debt. Correct me if I'm wrong.

Mr. IPO said...

Thanks CarlJ. My bad! :) amended

Anonymous said...

Hi Mr IPO,
I look everywhere in your SG IPO & SRS blogs to subscribe for email alert of your articles, but couldn't find any member subscription slot.
If your blogs enable me to do so, could you please direct me to the spot to do so?
Thanks very much, and keep up the wonderful help you give us.

Mr. IPO said...

If you visit via web browser, it's on the top right area just below the FOR IPO NEWBIES. click on the Email RSS icon and you are done. The fastest way is to click like on my Facebook page though. Haha. Tell me again if you have problem?

Anonymous said...

Mr Ipo applying for public tranche?

Mr. IPO said...

Probably not. I have 8 lots from placement tranche though.

Anonymous said...

Hi If i apply the IPO on ATM, it will not reflect on my brokerage account right? How do i "tranfser" the holdings to my brokerage account so can i can track it? Or how do i buy/sell the stock if I don't move it over to my brokerage account. Thank you? - IPO Newbie

Mr. IPO said...

It will appear in your CDP account. Just sell thru any brokerage account that is linked to your CDP.

obat tradisional untuk kanker said...

Nice blog,, i'm very enjoyed to visit this site. have a nice day :D

Anonymous said...

I bought this REIT at 0.90 but now price has gone down. Today is 0.89 the lowest. I think the recent news of virus outbreak in Africa do play important factor on the price of this REIT as it consist of hotel. Should i sell them all and bought back at lower price?

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