Frasers Hospitality Trust (SGX:ACV) is a S$1.40B real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Singapore stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Frasers Hospitality Trust is lagging or leading in the industry. View our latest analysis for Frasers Hospitality Trust
What’s the catalyst for Frasers Hospitality Trust’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. In the previous year, the industry saw growth in the teens, beating the Singapore market growth of 13.11%. Frasers Hospitality Trust leads the pack with its impressive earnings growth of over 100% last year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -50.88% compared to the wider REIT sector growth hovering next year.
Is Frasers Hospitality Trust and the sector relatively cheap?
REIT companies are typically trading at a PE of 15.16x, relatively similar to the rest of the Singapore stock market PE of 14.07x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 6.90% on equities compared to the market’s 7.34%. On the stock-level, Frasers Hospitality Trust is trading at a lower PE ratio of 8.88x, making it cheaper than the average REIT stock. In terms of returns, Frasers Hospitality Trust generated 10.29% in the past year, which is 3.39% over the REIT sector.
Frasers Hospitality Trust is a REIT industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Frasers Hospitality Trust is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Frasers Hospitality Trust’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has ACV’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Frasers Hospitality Trust? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.