Proposes to take FHT private
? FPL is proposing to acquire all FHT units it does not own, excluding units
held by TCC Group.
? The scheme consideration of S$0.70 per FHT unit implies 1.07x P/NAV and
is at a 43.8-48.5% premium to FHT’s 1-12-month VWAP.
? Reiterate Add, with an unchanged TP of S$1.41.
FPL proposes to take FHT private
Frasers Property Hospitality Trust Holdings Pte Ltd, a wholly-owned subsidiary of Frasers
Property Ltd (FPL) is proposing to take private Frasers Hospitality Trust (FHT SP, CP:
S$0.69, Not Rated) through a trust scheme of arrangement. The offeror is proposing to
acquire all of FHT’s stapled units, other than the stapled units held by TCC Group
Investments Ltd and FPL. As at 13 Jun, the date of announcement, FPL owned 25.8% of
FHT units while TCC Group held 37.72%. The scheme consideration of S$0.70/FHT unit
implies 1.07x P/NAV and represents a 43.8-48.5% premium over FHT’s 1-, 3-, 6- and 12-
month VWAP. The deal is subject to the approvals of unitholders, the court and regulators.
Taking a long-term view on hospitality
The transaction is in line with FPL’s long-term strategy of leveraging on its synergistic multiasset class capabilities to create value, with hospitality remaining one of its core
businesses. It will also allow FPL to increase its investment in hospitality assets and to
leverage on its deep understanding of FHT’s assets and adopt a disciplined approach to
drive performance. The group remains cautiously optimistic on the long-term prospects of
the hospitality sector. In terms of proforma financial impact from the transaction, FPL
indicated that its proforma FY21 EPS (before fair value change and exceptional items) and
NTA could decline by 5.5% and 1.3%, respectively, including transaction costs, while its
net debt to equity ratio could increase by 5% pts.
Opportunity for unitholders to unlock value
From FHT’s perspective, it has long-term challenges which limited its growth including its
sub-scale size relative to its SREIT peers and as such was unable to reap the benefits of
a continued listing. Meanwhile its operating environment remains uncertain due to cost
inflationary pressures, ongoing geo-political tensions, and rising interest rate outlook. The
scheme consideration offers FHT’s existing unitholders an opportunity to unlock value,
given that the scheme consideration is at a premium to its BV.
Reiterate Add rating
We leave our FY22-24F estimates unchanged pending the transaction’s completion, and
maintain our RNAV at S$2.57 and TP at S$1.41 (still based on 45% discount to RNAV).
Active capital deployment is a potential re-rating catalyst. Downside risks: slower value
unlocking activities due to the weaker macro outlook.