Fraser Hospitality Trust – [Failed Privitization, What To Do Now?]

14th September, 2022, 11:44 AM

Fraser H trust saw a huge gap down of 24% after its privatization deal fell through falling short of its 75% approval by just 0.12%.

What are our thoughts?

Fraser H trust has 14 properties over Asia and Australia and some of its recognizable property includes Intercontinental at Bugis, Westin KL and Novotel Darling Square.

Its current book value is around 65 cents and with the drop bringing it close to its 50 cents support, this could present a good entry for longer term investors.

Before Covid, Fraser H trust’s dividend yield was around 7% but due to covid it dropped to around 1.3%.  With countries opening up, dividend might be restored in the future. “The global travel and tourism sectors are projected to return to pre-pandemic levels in 2023 and grow at a rate that will outpace global gross domestic product (GDP) growth”, the World Travel and Tourism Council (WTTC) said in an interview in April.

Assuming current price of around 55 cents and its future dividend go back to the 4 cents pre-covid level, that’s about 7.3% dividend yield.

Adding to that, a recovery in price also adds to a potential capital gain for investors.

With the failed privatization, it might take another 6 or more months for any fresh offer and if a new offer comes, it might be above 70cents but how much more is anyone’s guess. Even at 72 cents it would mean about 40% upside.

So if you ask us, we think that Fraser Hospitality trust might be a potential good stock to put in your dividend portfolio and even if no offer comes , with the opening and recovery of the tourism sector, we might see Fraser H trust’s stock price gradually recovering.  Also, in their report, Fraser Property Limited views hospitality as one of its core business, so growing it or privatizing it is something they are considering. As FraserHtrust might be too small to reap the benefit of being listed so taking it private might be more benefical.

Some possible levels to look at will be $0.53-0.54 and 0.485 (that’s when the stock started to turn and move up back in March) .

Just sharing our thoughts



Kelwin & Roy