Frasers Hospitality Trust (FHT)

(23-04-2025, 05:40 PM)weijian Wrote: Dejavu with 2022? Maybe this time it will pass with the Aus tax higher tax issue holding OPMIs hostage?

Frasers Hospitality Trust undergoes strategic review

In June 2022, Frasers Property Hospitality Trust, a wholly owned subsidiary of FHT’s sponsor Frasers Property, proposed to acquire all FHT stapled securities aside from those held by itself, its subsidiaries and TCC Group Investments at a cash consideration of S$0.70 apiece.

The proposed privatisation, which would have erased more than S$1.3 billion worth of value from the local bourse if it succeeded then, came after the hospitality-focused S-Reit announced a strategic review of its business earlier in April that year.

https://www.businesstimes.com.sg/compani...gic-review

I voted against 3 years ago. Soon after the (just) failed privatisation attempt, FHT’s share price tanked but I held on. I believe FHT was poorly advised last time (by DBS), with misleading materials distributed to shareholders, alienating a significant portion of them. I wonder if FHT will appoint a more accomplished advisor this time.

I suggest it is difficult to believe that last year’s surge in FHT’s share price was due to anything other than an “awareness” that this latest “Strategic Review” was a probability. Will our Regulator’s antennae be raised? Or, more-to-the-point, will they do anything about it? I ain’t holding my breath.

Vested - and if any suitor wants that to change that then they’ll need to do a far more convincing job than that done in 2022.

So the Privatisation Offer is in. S$ 0.71, One Cent more than the price offered during the failed acquisition attempt of 3 years ago. Unsure if FHT and its Advisors have heeded the lessons that should have been taken on board from that failed attempt. The “rationale” for the privatisation appears little changed… as is the acquisition price.

On first read, I am far from convinced to accept the offer. I’ll be sitting tight.

Vested. Likely for a tad longer.

Market Price before announcement~0.665
Takeover price~0.71
Market price closing on 1st day post announcement~0.685

If first day trading is any indication, market sentiment judges the odds of the SOA been successful this round as (0.685 - 0.665)/(0.71 - 0.665) = 0.02/0.045 ~45%. So it is still a coin toss due to the high 75% hurdle required for both shares voted and headcount in the SOA meeting. I suppose a big portion of merger arbs who took earlier speculative positions may have taken profit. With this 50% odds, there may be plenty of new merger arbs selling insurance by taking up positions.


@RBM,
Checking back the prior 2022 SOA meeting, it seems like at least 25% of votes (independent) did not turn up. The vote share of these "non turnout" is double that of the 12% who turned up. So if I were FHT's advisor this round, it is quite clear what their strategy to get it successful this round will be. In addition, let's not forget that independent shareholders have seen their share price went up and down again. Based on all the lessons we have learnt on behavorial finance, will many of them be willing to endure that ride a 2nd time?

Finally, as of closing share price, the risk premiums are "relatively attractive" for any merger arbs who are selling insurance on the deal been closed. Totally possible for some big boys playing the merger arb game to sell this premium and then go to the SOA meeting to vote YES and ensure they are able to en-cash them. At least, this is what I will do (but unfortunately I am not a big boy)

(15-05-2025, 08:48 AM)weijian Wrote: Market Price before announcement~0.665
Takeover price~0.71
Market price closing on 1st day post announcement~0.685

If first day trading is any indication, market sentiment judges the odds of the SOA been successful this round as (0.685 - 0.665)/(0.71 - 0.665) = 0.02/0.045 ~45%. So it is still a coin toss due to the high 75% hurdle required for both shares voted and headcount in the SOA meeting. I suppose a big portion of merger arbs who took earlier speculative positions may have taken profit. With this 50% odds, there may be plenty of new merger arbs selling insurance by taking up positions.


@RBM,
Checking back the prior 2022 SOA meeting, it seems like at least 25% of votes (independent) did not turn up. The vote share of these "non turnout" is double that of the 12% who turned up. So if I were FHT's advisor this round, it is quite clear what their strategy to get it successful this round will be. In addition, let's not forget that independent shareholders have seen their share price went up and down again. Based on all the lessons we have learnt on behavorial finance, will many of them be willing to endure that ride a 2nd time?

Finally, as of closing share price, the risk premiums are "relatively attractive" for any merger arbs who are selling insurance on the deal been closed. Totally possible for some big boys playing the merger arb game to sell this premium and then go to the SOA meeting to vote YES and ensure they are able to en-cash them. At least, this is what I will do (but unfortunately I am not a big boy)

Good Day to you Weijian, Thanks for your thoughtful post. 

I have now had the opportunity to read the materials prepared by the Sponsor Acquirer FPL & their advisors. Appears to my simple, aged mind they have not learned any lessons from their failed acquisition attempt of 3 years past, not listening to the views of those who voted Against last time round. Yes, it was close but there was a group of Shareholders who were disgruntled by the Offer Price and moreover the weak rationale put before Shareholders.

The “Scheme of Arrangement” path has again been adopted, meaning the shares of the Sponsor FPL (& chums) get excluded from the Count. Like you, I believe it could be close. And I suspect many Shareholders will be reluctant to commit early in the process. If I was a betting man (of course, I’m not !!), I’d place a few Dollars on the Offer Price eventually being inched up, sometime during the process. But if it remains rooted at S$ 0.71, I will NOT be voting For. I see zero incentive to accept the offer now - As so often in these cases, patience and determination to hang-on appears the most prudent way-forward.

Best to you weijian - and thank you for the superb job you do in moderating this fine site.

Vested…with a mindset of voting Against again.

(15-05-2025, 10:13 AM)RBM Wrote: Good Day to you Weijian, Thanks for your thoughtful post. 

I have now had the opportunity to read the materials prepared by the Sponsor Acquirer FPL & their advisors. Appears to my simple, aged mind they have not learned any lessons from their failed acquisition attempt of 3 years past, not listening to the views of those who voted Against last time round. Yes, it was close but there was a group of Shareholders who were disgruntled by the Offer Price and moreover the weak rationale put before Shareholders.

The “Scheme of Arrangement” path has again been adopted, meaning the shares of the Sponsor FPL (& chums) get excluded from the Count. Like you, I believe it could be close. And I suspect many Shareholders will be reluctant to commit early in the process. If I was a betting man (of course, I’m not !!), I’d place a few Dollars on the Offer Price eventually being inched up, sometime during the process. But if it remains rooted at S$ 0.71, I will NOT be voting For. I see zero incentive to accept the offer now - As so often in these cases, patience and determination to hang-on appears the most prudent way-forward.

Best to you weijian - and thank you for the superb job you do in moderating this fine site.

Vested…with a mindset of voting Against again.

hi RBM,
FP probably paid millions for the advice (OCBC style) . Since the last attempt, the NAV has decreased by ~0.5cent and with this 1 cent increase, we can argue that the current offer is more attractive than previous. The current FHT SOA is similar to the recent Paragon Reit SOA which received 97.6% and 82.8% approval for votes and headcount respectively. So I suppose it will be instructive to compare them as below:

Paragon REIT SOA offer
- 1.07x to adjusted NAV. The adjusted NAV is lower than the annual report's NAV after adjusting for the FY24 cash dividend-to-be-paid. The NAV is also quite "up to date" as the offer came ~2 months after fiscal year close.
- Paragon REIT had traded at avg of 1x NAV in the last 3 years, beating the 0.8x of retail S-REIT.
- Offer price indicates an exit dividend yield of 4.7% and ~11% premium to vol weighted average market price of last 2 years.
- The IFA PPCF indicated that the mean and median of price/adjusted NAV of precedent M&As at 1.06x and 1.03x.
Details found here: https://links.sgx.com/FileOpen/PARAGON%2...eID=832659

FHT SOA offer
- 1.11x to adjusted NAV.
- FHT had traded at avg of 0.76x NAV in the last 3 years, compared to hospitality S-REITs' 0.62x.
- Offer price indicates an exit dividend yield of 4.6% and ~36% premium to vol weighted average market price of last 1 year.

Comparing both offers - in the heart of hearts, they look very similar and actually FHT offer price is slightly better. In addition, we know that hospitality REITs are more exposed to economic cycles than retail S-REITs and so in this regard, FHT offer price looks even better.

So, are there any hidden value beyond FHT's balance sheet which uses fair value accounting? Will there be any change in plans that could rezone some of FHT's assets to uplift their value? Or really, is this just some of us suffering from excessive endowment effects?