Weaker currencies could hurt Frasers Hospitality Trust's NPI

It could affect 80% of the company's net property income (NPI).

Fraser Hospitality Trust’ (FHT) portfolios in Australia, Malaysia, Japan, UK, and Germany could be threatened by the weaker currencies in said countries, DBS Equity Research said. These portfolios contribute 80% to the firm’s NPI.

In Q3, the firm recorded a 2.8% dip YoY in its NPI to $28.5m whilst revenue slipped 1.8% to $38.22m.

“However, compared to consensus, we are more bullish on the potential recovery in FY19 as we expect the recovery in the Singapore hotel market to gather steam in 6 months’ time, earnings for the underperforming assets should have rebased in FY18, and finally the boost from AEIs such as the recently refurbished Novotel Sydney Darling Square,” DBS noted.

The bank believes that FHT’s portfolio of quality hotels in key gateway cities will be hard to replicate at FHT’s current trading yield.

DBS said that the hospitality firm is in a “strong position” to grab acquisition opportunities as its gearing stands at 33% to 34%.

“Our confidence in FHT’s ability to execute on its inorganic strategy is underpinned by its successful track record such as the purchase of Sofitel Sydney Wentworth and Novotel Melbourne,” the bank commented.