FRASERS Hospitality Trust’s (FHT) pro forma distributable income for financial year 2024 is estimated to fall by S$1.3 million, following changes to its Australian unit’s managed investment trust status.
This represents about 2.5 per cent reduction to FHT’s reported distributable income for FY2023, said its managers on Wednesday (Oct 9).
FHT’s wholly owned Australian subsidiary, FHT Australia Trust (FHTAT), would not qualify as a withholding managed investment trust for FY2024, following the completion of a share swap deal that was entered into in July.
“FHTAT will consequently not enjoy this preferential Australian withholding tax rate, and the distribution from FHTAT in respect of FY2024 would be subject to an effective Australian tax rate of 37.5 per cent,” said the managers.
To be a withholding managed investment trust, a foreign individual cannot directly or indirectly hold, control or have the right to acquire 10 per cent or more interest in FHT and FHTAT.
As part of the agreement, Thai Beverage (ThaiBev) transferred its entire 28.78 per cent shareholding in Frasers Property to TCC Assets, an entity owned by the Sirivadhanabhakdi family.
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TCC Assets then transferred its 41.3 per cent stake in Fraser and Neave to ThaiBev’s indirect wholly owned subsidiary InterBev Investment.
After the share swap, ThaiBev does not have an interest in Frasers Property and is no longer deemed to have an interest in the stapled securities of the company.
The deal also caused TCC Assets’ effective stake in Frasers Property to rise to about 86.89 per cent, based on the total number of issued shares as at the date of the deal.
As a result, FHT’s Australian unit no longer meets the requirements to be a withholding managed investment trust.
Under applicable financial reporting standards, FHT needs to record a deferred tax liability to account for potential future capital gains tax if any of the Australian properties owned indirectly by FHTAT are sold.
Given the changes in FHTAT’s status, FHT’s pro forma additional deferred tax liability for FY2024 is about S$22 million. This represents about 1.7 per cent decline to FHT’s net asset value per stapled security as at Sep 30, 2023.
FHT will be announcing its unaudited FY2024 financial results on Nov 7.
Stapled securities of FHT were trading down 1.1 per cent or S$0.005 at S$0.45 as at 9.46 am on Wednesday, after the news.
