Frasers Hospitality Trust (FHT)

[RBM]

Offer for FHT is in….
+ S$ 0.70 all-cash. + Acquirer is Frasers Property (FP).
+ As of noon today, Trading Halt is still in-force. Orders not being purged.
+ My first scan of the offer documentation:….I’ll need to be read it again - this time darn carefully. Some blatantly misleading stuff in the pack IMO, e.g. using a 7th April Share Price as the “last transacted price” on the basis it was the “last undisturbed price” - on 8th April, FHT disclosed a rather generic “Response to Media Enquiries” announcement to the SGX. I ain’t buying it.
+ Presentation Pack presents a litany of all FHT’s terrible prospects. Then why is FP aiming to acquire it? Again, I ain’t buying it.

FP needs a 75% vote of the minorities to acquire (TCC, FP, >5% Shareholders will abstain). As things stand, I’ll be among the 25%. Price is too low. I’m hoping 70 cents is just the Opening salvo. HANG ON would be my recommendation to those Vested.

Vested in FHT.

[CY09]

https://links.sgx.com/FileOpen/Press_Rel...eID=731420

FHT privatization deal has failed. Company has resume trading and is back at its pre take over price

[weijian]

This is the 2nd refusal that has happened this year. Paragon REIT refusing Seletar Mall purchase from its Sponsor Cuscaden Peak was the first. Even as hospitality assets are having good near term prospects, is it because of the current financing conditions (whether equity raising or loan) are not conducive? If so, this is really a sign of things to come!

On the other hand, this is also a sign of good corporate governance and independence well demonstrated by the 2 REIT managers.

Right of First Refusal in connection with Interest in Capri by Fraser, Changi City

The Property is under JTC lease with 45 years remaining and consists of a 12-storey hotel operating under the “Capri by Fraser” brand.

The Managers have considered the opportunity and is of the view that acquiring the Property does not meet FH-REIT’s prevailing investment strategy. As such, the Managers have decided not to exercise the ROFR.

https://links.sgx.com/FileOpen/FHT_Annou...eID=792454

[Shrivathsa]

One side of the asset swap that F&N and Thai Bev did, tax rate of FHT goes up in Australia. Net result DPU down 7-8%. Could not have the Trust Board at least objected to the swap or indicated the impact then?

[weijian]

hi Shrivathsa,

Imagine your rich Grandma shifting her assets between her sons/daughters before she dies. As a grandson born by one of her daughters who hasn't been dominant in the family, it is not hard to imagine that the grandson has no say in the inheritance as all the uncles/aunties/bigger cousins dominate the proceedings.

[Shrivathsa]

While looking at Frasers Hospitality Trust, one interesting thing that jumped out was the sharp spike in volume and price from results announcement on Nov 12.

Nov 27 - Volume 15,600 shares - Price of 0.42
Dec 6 - Volume 14 million shares - Price of 0.505
Dec 26 - Volume 5 million shares - Price of 0.56

There is an announcement by the manager on change of control.

https://investors.sgx.com/company-disclo...HLBV1X1NPW

Wonder who is buying in such volume, cannot be controlling shareholder, because then they have to make a disclosure.

For what it is worth, have no shares in this, is there not some SGX explanation needed for abnormal jumps of +25% in a month, especially when the stated news is negative for the company?

[ghchua]

Hi Shrivathsa,

There were some market speculation on another privatisation offer for Frasers Hospitality Trust (i.e. FHT) to resolve their Australian tax issues for their assets in Australia due to the share swap. Though it is speculative, obviously there are some buyers betting on that happening.

As for why no queries from SGX RegCo despite the abnormal jumps in unit price of FHT that you have observed, I think you might have read that they are trying to "remove friction" in the market by making queries regarding companies’ unusual trading activity "more targeted".
https://www.businesstimes.com.sg/compani...-companies

[Shrivathsa]

Hi Mr Chua,

Cool, got it, clear, had missed that line on queries being more targeted. Thought it was one of those anodyne boiler plate comments / commentary that SGX is known for, sometimes I wonder whether the lack of competition is what makes SGX lazy, then have to remind myself that it is a small market and they are trying their best and they cannot exactly force good corporate governance or shareholder friendly corporate behavior.

Thanks for the tit bit on privatisation, may make a lot of sense for long suffering FHT holders, as the performance over the last few years has been a bit of a death by thousand cuts scenario

[weijian]

It is probably cheaper to shuffle the Australian assets around into another entity that gets back the favorable tax treatment than let's say, privatize FHT at NAV.

RESPONSES TO THE SUBSTANTIAL AND RELEVANT QUESTIONS FROM FHT STAPLED SECURITYHOLDERS

Question: The loss of Managed Investment Trust (“MIT”) status for FHT’s Australian subsidiary results in a higher effective tax rate, which is a worrying concern. While this situation is beyond the control of the Managers, distribution income will be affected. We hope that FHT can address this issue and perhaps relook into a privatisation plan to unlock value for Stapled Securityholders.

Answer: As this issue relates to entities above FH-REIT’s unitholder’s level, this situation is beyond the control of FHT and the Managers. However, in light of the higher tax exposure for FHT’s Australia portfolio, the Managers are taking the opportunity to re-evaluate the strategy and portfolio composition of FHT.

https://links.sgx.com/FileOpen/FHT%20-%2...eID=830148