Frasers Hospitality Trust *Official* (SGX:ACV)

[Dividends101]

Hmm.. so is this a good buy or not? Rather reluctant to go in due to its high gearing..

 

[sandwich]

Ballot. You pay upfront for the number of shares you apply for, if unsuccessful, the money will be refunded to you. When i was new to IPOs, some patient guy explain things to me calmly & patiently, every new IPO the same old questions get asked repeatedly, I am returning that favour to you

Thanks for the explanation~!

 

[chewjekhui]

My analaysis. I am going to be vested in this share, but I would like to hear counter arguments and stuff. THIS IS NOT AN POST TO ENCOURAGE YOU TO BUY. Please consult your own professional investment banker/consultant

I was initially drawn to the IPO of Fraser Hospitality Trust for a few basic reasons (prior to prospectus coming out).

1. The other REITS are getting expensive and has not came down despite the rumoured May effect and the World Cup effect.

2. Quality name hotels and Serviced Residence in some exciting places like Japan (Abenomics 3 Arrow, 2020 Olympics), Singapore with the rising rich in S.E.A (Indonesia, Vietnam (Potentially)). Although London and Australia are stable markets that are not exciting (Australia experiencing slow-down due to China cooling, London region still reeling from Euro crisis. Although further confirmation about the NPI contribution compared to NTA contribution is a stark difference (See Pg 19, Sg properties are overvalued by a huge margin, I know it is not a direct co-relation as the property is in semi prime region like Bugis, but 14% difference is a lot?)

Looking at the prospectus (Pg 21,22,23,24) I have seen the Fraser Suites line of Serviced Residences and have faith in it. Especially the Singapore counterpart as the place is very popular with rich and affluent Japanese. Intercontinental is a good brand. The rest are placed within close distance to MRTs and other city hubs or are iconic buildings which the rich like to stay in (Class factor).

Looking at pg 29, the serviced residence aspect is quite scary as a huge majority of their tenants are only for less than 1 month (Dont know if that is the norm for serviced residence, adding on Entertainment and leisure makes up 23.3% of the clientèle, apart from the huge others being lumped in one segment) 1-6 months only 24.6%

Looking at pg 30 and 31, their hotel client segment looks normal to me although occupancy rates are not at high 90% for hotels (Understandable as they serve the high end market) and service residences (This part I cannot understand, can someone enlighten me?)

Pg 32

(From the IPO Prospectus) Singapore has also staged many global events in recent years including the inaugural Singapore 2010 Youth Olympic Games, Formula One SingTel Singapore Grand Prix and the Volvo Ocean Race. In September 2012, Formula One announced that they will continue the Grand Prix Night Race in Singapore for another five years. In April 2013, a new nature tourism attraction, the River Safari, opened which will complement the city state’s current offerings, including the Singapore Zoo, the Night Safari and Jurong Bird Park. Future tourist attractions include the Singapore Sports Hub at Kallang (2014) and the National Art Gallery (2015).

Corporate demand in Singapore is likely to remain stable in the short to medium term as Singapore remains one of the key economic hubs in Asia Pacific with its prudent economic policies that continue to attract foreign firms and investors.

According to the latest global rankings by the International Congress and Convention Association, Singapore has retained its position as Asia’s Top Convention City for the 12th consecutive year in 2013, affirming the city’s position as a Meetings, Incentives, Conventions and Exhibitions (MICE) destination. In the long term, Singapore is poised to continue its stable growth as it is able to attract high profile events and delegates beyond Southeast Asia.

Sounds on the whole too optimistic, but general outlook for S.E.A should be fine, wealthy customers should be fine in S.E.A

Kobe also has a number of global and domestic companies which generate corporate demand to the city. These include Procter & Gamble, Nestle, Kawasaki Heavy Industries, Asahi Holdings and “K” Line Group which has established headquarters in Kobe.

In addition, MICE events held in Kobe are also key demand drivers. According to Japan National Tourism Organization (JNTO), Kobe was the sixth largest host of events since 2010.A total of 92 meetings were held in 2012, in which the majority were meetings related to biomedical innovation. Well-established MICE infrastructure such as the Kobe Convention Centre on Kobe Port Island, easy accessibility from major cities in Japan and the presence of three airports which are within easy access has enabled the city to become a more
attractive business destination.

The Kobe Biomedical Innovation Cluster (KBIC) has been planned in Port Island (Bay area) for 15 years. Kobe city promotes Port Island to become a centre of medical technology and 17 research and development facilities have already been constructed around Iryo Centre station. A cancer medical centre is still in construction process. In cooperation with more than 200 companies, KBIC will be one of the major national projects that also contribute to higher
performance of hotels in the surroundings.

Sounds okay to me, only part is that Japanese companies are a bit stingy on providing their employees on serviced residences for their foreign counterparts when working on projects unless it is short durations, tourism is their key target as evident in their client profiling segment earlier.

London properties are not very attractive, with major events happening this year, income may not be paid as dividends for the following year

<a href="http://imgur.com/gQbfZAB"><img src="http://i.imgur.com/gQbfZAB.jpg" title="Hosted by imgur.com"/></a>
I like the ratio of the rentals

I just saw the Money Mind interview with the Fraser CEO, he said he prefers the stability of Hotels with long term staying customers than to take advantage of the huge spike of clients should an event happen.

Got no time to analyse the financial information, shall post an update again

Conclusion: Vested due to interesting outlook that they are looking at Tier 2 China cities for their Hospitality Biz? The REIT is going to Cambodia? I read it off somewhere, cannot remember where

 

[chewjekhui]

To add salt to your wound, if I'm not wrong, NAV is 83cts, IPO price 88cts, ie you're buying at 1.06 P/B. Quite a number of the properties are freehold or 999 lease, but are sold to FHT for only 75years, after that revert back to FCL. Seems 2014 yield is only 6.9%, only 2015 yield is 7%, caveat with income support, without income support yield drop to 6.5%. This is what i manage to figure out, correct me if i'm wrong.

Income support was for OUE H Trust also right? Typically present in slightly weaker REITS?

 

[actman]

yet another reit ipo at $0.88
the curse of $0.88

 

[Opps-gal]

To add salt to your wound, if I'm not wrong, NAV is 83cts, IPO price 88cts, ie you're buying at 1.06 P/B. Quite a number of the properties are freehold or 999 lease, but are sold to FHT for only 75years, after that revert back to FCL. Seems 2014 yield is only 6.9%, only 2015 yield is 7%, caveat with income support, without income support yield drop to 6.5%. This is what i manage to figure out, correct me if i'm wrong.

I most likely buy from market if price sink.

 

[nixiak]

Can press ATM already?

 

[battledome64]

I most likely buy from market if price sink.

How's your AHT? They really know when to raise money

 

[lzydata]

Seems like there is really a lot of excitement for this IPO, which bodes well for the opening. But then again, it also means a lesser chance to get allotted

For longer term investors, yes, you can look at the numerous alternatives already on the market.

 

[sandwich]

Ballot. You pay upfront for the number of shares you apply for, if unsuccessful, the money will be refunded to you. When i was new to IPOs, some patient guy explain things to me calmly & patiently, every new IPO the same old questions get asked repeatedly, I am returning that favour to you

Are there any commissions to be paid for IPO allotment?

 

[Minx99]

Seems like there is really a lot of excitement for this IPO, which bodes well for the opening. But then again, it also means a lesser chance to get allotted

For longer term investors, yes, you can look at the numerous alternatives already on the market.

This ipo would do well if only they package it with a lower gearing in the 30 range like the rest of its peers,it's high gearing of 41.7% don't bode well with the impending rise of interest rate next year.
Also it seems the yield for 2014 is more likely 6.5% (with income support) instead of 6.9% as it is calculated for the period from 1st Apr 2014 till 31st sep 2014, but FHT will actually start trading only in middle of July 2014 instead?

 

[Minx99]

Are there any commissions to be paid for IPO allotment?

If you press at the ATM or use internet banking, they'll deduct $2 from your account.

 

[Dividends101]

Not to forget that it is stapled to Frasers Business Trust. ALL Business Trusts in sg have never risen beyond their IPO price..

 

[Bedokian]

Not to forget that it is stapled to Frasers Business Trust. ALL Business Trusts in sg have never risen beyond their IPO price..

Frasers Business Trust?

 

[bhalimking]

Not to forget that it is stapled to Frasers Business Trust. ALL Business Trusts in sg have never risen beyond their IPO price..

Historically, that's the case with business trust.

But the main reason they have done it the stapled security manner is for contingent reason such as if in the event the master lessee walked away and you need another dormant to take that up. For now, the trust is acting as an empty dormant.

I don't think the stapled security is the main issue here.

 

[Dividends101]

Historically, that's the case with business trust.

But the main reason they have done it the stapled security manner is for contingent reason such as if in the event the master lessee walked away and you need another dormant to take that up. For now, the trust is acting as an empty dormant.

I don't think the stapled security is the main issue here.

Thanks for the enlightenment and clarification!

 

[Wood4]

Mai Kia !
Subscribe !

 

[Minx99]

Mai Kia !
Subscribe !

I'm sorry but i like to caution that one should not invest their hard earned money using this Kamikaze investing technique( Mai Kia), it's the surest way to lose your money in the stock market. Always weigh the downside against the rewards. This is especially important for newbies & those without deep pockets

 

[Carnage]

Appears to be able to pop. UOBKH had to close their placement offer as their portion oversub.

 

[Dividends101]

Appears to be able to pop. UOBKH had to close their placement offer as their portion oversub.

Cfm oversubscribed one.. the hype is too huge already.. so little IPOs this year somemore..