Frasers Hospitality Trust Rights Issue – Opportune Time To Lower Gearing
Sorry folks for the late post (almost a month!), as I was really busy with work and life.
Anyway, Frasers Hospitality Trust declared a rights issue at the end of September, and I took up the rights issue with excess, as I believe that this was a prudent and pro-active measure by the management to lower their gearing and to fund an acquisition of a hotel in Australia. An interesting thing to note was that the dormant business trust portion of the stapled security would be activated as the master lesse of the hotel once the hotel as been acquired, as set out in the circular for the rights issue. So in the future, not only FHT would be receiving income from it’s properties, it would also receive income from their business trust as well.
All in all, this looks to be a pretty good deal in the future, and I am fairly confident that FHT would be able to weather the uncertainty in the markets in the short term, and maintain a high dividend payout rate in the long run.
Related Posts
For this rights issue, it seems its non dpu accretive from 7.56 cents to 6.338 cents.
Even if we considered the discount given for the rights and all rights subscribed by a person, its distribution yield still drops.
Hi,
I note your concern with the non-accretive acquisition, but do note that FHT is a stapled security consisting of a REIT trust and a business trust. As they have announced, the dormant business trust will be activated, and I believe this drag is short-term and will improve the DPU in the long run, assuming global macroeconomic status remains flat.