Thoughts on $0.70 Offer for Frasers Hospitality Trust
Frasers Hospitality Trust (FHT) $FRASERS HOSPITALITY TRUST(ACV.SG$ was halted for a couple of days and the announcement has finally arrived - Frasers Property $FRASERS PROPERTY LIMITED(FSRPF.US$ is offering unitholders $0.70 with the intention to delist FHT.
Disclosure: I am not a unitholder of FHT or a shareholder of Frasers Property. I am just sharing my views about the Offer.
Let's get a sense of the historical trading range of FHT.
The highest price was $0.92 while the lowest was $0.36. The Offer is 24% below the highest and 94% above the lowest.
The pre-Covid share price was $0.66.
Since PM Lee's Singapore reopening speech on 24 Mar 2022, FHT share price has been climbed up by 35%.
The last close was at $0.66 too and the Offer is 6% higher.
Some unitholders may feel disadvantaged as the Offer came in at a time when the travel industry is on the cusp of recovery. They may believe more upside could be achieved given more time.
I see the Offer as a fair one as the price assumes FHT has fully recovered from the Covid impact, which in reality it hasn't. Unitholders can realise the gains before the fundamentals improve and deploy the proceeds to other hospitality stocks if one still wants to get exposure to the sector.
The only beef I have is not with the Offer, but with who the Offeror is. One of the reasons for this Offer was because FHT is too small to compete - ranked #32 among REITs and business trusts listed on the SGX. It was also the second smallest hospitality trust.
In this case, Frasers Property does not need to be the Offeror. Frasers Logistics & Commercial Trust (FLCT) can merge with FHT. FLCT is the fifth largest REITs/business trust on the SGX.
The combination would solve the 'smallness' issue and there has been precedence of a commercial and hospitality trusts merging - OUE Commercial merged with OUE Hospitality 3 years ago.
In the first place, FLCT already did a weirder combination - between logistics and commercial, why not throw in hospitality too?
In this way, the unitholders can continue to enjoy the higher dividend payout should FHT remain in a trust structure. I believe that Frasers Property dividends wouldn't be as generous once FHT is brought under its wings.
Disclosure: I am not a unitholder of FHT or a shareholder of Frasers Property. I am just sharing my views about the Offer.
Let's get a sense of the historical trading range of FHT.
The highest price was $0.92 while the lowest was $0.36. The Offer is 24% below the highest and 94% above the lowest.
The pre-Covid share price was $0.66.
Since PM Lee's Singapore reopening speech on 24 Mar 2022, FHT share price has been climbed up by 35%.
The last close was at $0.66 too and the Offer is 6% higher.
Some unitholders may feel disadvantaged as the Offer came in at a time when the travel industry is on the cusp of recovery. They may believe more upside could be achieved given more time.
I see the Offer as a fair one as the price assumes FHT has fully recovered from the Covid impact, which in reality it hasn't. Unitholders can realise the gains before the fundamentals improve and deploy the proceeds to other hospitality stocks if one still wants to get exposure to the sector.
The only beef I have is not with the Offer, but with who the Offeror is. One of the reasons for this Offer was because FHT is too small to compete - ranked #32 among REITs and business trusts listed on the SGX. It was also the second smallest hospitality trust.
In this case, Frasers Property does not need to be the Offeror. Frasers Logistics & Commercial Trust (FLCT) can merge with FHT. FLCT is the fifth largest REITs/business trust on the SGX.
The combination would solve the 'smallness' issue and there has been precedence of a commercial and hospitality trusts merging - OUE Commercial merged with OUE Hospitality 3 years ago.
In the first place, FLCT already did a weirder combination - between logistics and commercial, why not throw in hospitality too?
In this way, the unitholders can continue to enjoy the higher dividend payout should FHT remain in a trust structure. I believe that Frasers Property dividends wouldn't be as generous once FHT is brought under its wings.
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