Considering FHT’s low 34.4% gearing and its sponsors growing assets under management (AUM), the analyst foresees the divestment proceeds being channeled into funding further opportunities in Europe.
While he views the trust’s Singapore portfolio as stable, the analyst expects competitive pressure on revenue per available room (RevPAR) to persist in the near-term.
This is largely due to room supply from new players such as Andaz and JW Marriott in the Bugis micro-market, as well as the reopening of 329 rooms as the Swissotel post its asset enhancement initiative (AEI).
“FHT remains undemanding on valuations both against history and peers at 0.8x FY19E P/B… We believe management could be considering a major portfolio repositioning,” comments Chua.
“This is against a backdrop of supply-side headwinds in Australia, a third of its AUM (CBRE now projects 2,000 new rooms in Sydney planned for completion till 2020) and stronger growth fundamentals in Europe, where there are expansion opportunities from both its sponsor’s ROFR assets and third-party deals,” he adds.
As at 11am, units in FHT are trading flat at 74 cents or a FY19E DPU yield of 6.79%.
