Frasers Hospitality Trust: Hold Rating Amid DPU Decline and Tax Challenges

Analyst Geraldine Wong from DBS maintained a Hold rating on Frasers Hospitality Trust (ACV – Research Report) and decreased the price target to S$0.45 from S$0.62.

Geraldine Wong has given his Hold rating due to a combination of factors impacting Frasers Hospitality Trust. The trust has experienced a decline in full-year distribution per unit (DPU), falling short of expectations due to increased taxes and interest costs. Although Japan and Malaysia have shown a robust recovery with significant growth in gross operating profits, forward bookings are not as strong, reflecting a normalization in travel demand.
Furthermore, the disqualification from preferential tax rates in Australia, a critical market for the trust, is expected to lead to a 13% year-on-year decline in FY25’s DPU. This tax issue stems from a change in shareholding, affecting the trust’s qualification for a managed investment trust status. Despite trading at a value close to its historical low and appearing undervalued by price-to-book metrics, these challenges contribute to the Hold rating, with a revised target price of SGD0.45.

Wong covers the Real Estate sector, focusing on stocks such as CapitaLand Mall, Ascott Residence, and CDL Hospitality Trusts. According to TipRanks, Wong has an average return of -1.3% and a 41.41% success rate on recommended stocks.

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Frasers Hospitality Trust (ACV) Company Description:

Frasers Hospitality Trust, or FHT, is a global hotel and serviced residence trust that invests in income-producing real estate and real estate-related assets used mainly for hospitality purposes. Its hotels are luxury, upscale, and midscale properties. FHT’s investment properties are across Singapore, Australia, Malaysia, Japan, and the United Kingdom, in cities such as Singapore, Kuala Lumpur, Kobe, Sydney, London, Edinburgh, and Glasgow. Frasers derives the majority of its revenue from its assets in Singapore and Australia. International hotel chains, such as Accor, and InterContinental manage the company’s portfolio; as well as Frasers Hospitality, which is a serviced residence operator.