Well-diversified THIF expected to do well amid tourism recovery
TCC Land has launched the Thai Hotel Investment Freehold and Leasehold Property Fund (THIF), and its fund manager, Krungthai Asset Management (KTAM), is confident that the fund will do well from the recovery of the tourism industry.
Chavinda Hanratanakool, chief executive officer of KTAM, said THIF was quite diversified. It will invest in 10 freehold rights and two leasehold rights of hotel land and buildings in prime tourist areas in Bangkok and other provinces, such as Phuket, Surat Thani and Chiang Mai. This means that the risk is spread out and investors can expect a better return from the recovery of tourism in each province.
“The lifting of the curfew means that everything related to the tourism industry should definitely be getting better from the increase of confidence and the return of the nightlife scene. Hotels in Bangkok have taken the hardest hit from the curfew, but the income level and the hotel occupancy rates have not dropped that much in other provinces,” she said.
Chavinda said that when the occupancy rate is low in one place it will be high in another, which means that the income for THIF will be balanced out, since each province does not receive the same effect from natural disasters and political situations.
“The spread of income and assets is good for tenants and the fund, which eventually means the benefit will fall on the investors,” she said.
According to the Bank of Thailand website, the total number of foreign tourists around the country fell from 2,319,820 in January to 2,022,400 in April. The hotel occupancy rate in Bangkok fell from 58.17 per cent in January to 52.01 per cent in April. In the North in the same period, it fell from 67.16 per cent to 49.15 per cent. In the South, however, the average occupancy rate rose from 67.78 per cent in January to 68.24 per cent in April.
Chavinda explained that since THIF’s assets and income sources were spread out across the country, and the freehold and leasehold rights are managed by professional hotel chains with high-end clients as their main targets (including Meridien, Starwood Asia Pacific Hotels and Resorts, and Hilton International Management Corp), KTAM was confident that the fund would generate a profit of Bt1.5 billion annually and a return on investment of 5 per cent per annum.
THIF has a dividend policy of pay-outs at least once a year, at no less than 90 per cent of net profit.
She said THIF would lease out 11 of its hotel properties to TCC Hotel Asset Management, and one to Paendintham Property Development under a three-year contract. Tenants will pay THIF fixed rent, totalling Bt384.03 million in cash and Bt75 million in bank guarantees as collateral for the first three years of a lease, starting from the first day that the fund invests in all 12 projects.
The fund’s top three unit holders are TCC Land (33.32 per cent), UOB Kay Hian (Hong Kong) (16.86 per cent) and Panachai Panichayakarn (15.27 per cent).
Paveena Sriphothong, senior vice president of the Stock Exchange of Thailand, said THIF would trade in the Property Fund and REIT sector of the Property and Construction group. Its market capitalisation at its initial public offering was Bt26.2 billion, the highest among all property funds ever listed on the SET since 2003. THIF’s IPO price per share was Bt10.
Chavinda said the military’s ruling National Council for Peace and Order (NCPO) had provided a suitable environment for investment by providing some clarity in its economic policies.
“The NCPO’s policies are facilitating the investment environment, and we believe that from now on there will more good news for the economy, since many things that we have heard from the NCPO that are tangible will benefit investment in both the public and private sectors,” she said. “KTAM is also considering the launch of a trigger fund in the second half of the year based on suitable timing.”
She said the NCPO’s policies would largely direct the path for investment and KTAM would concentrate on investment in foreign and domestic funds in the capital market more than fixed income, which it concentrated on at the beginning of the year.
“Timing is important for investors and we will look at investment in riskier assets from now on,” she said.
However, despite the current positive vibes in the investment market, Chavinda warned of fluctuations, since the prospects of a continuous rise in the SET Index is still uncertain. KTAM believes that there will be a market-adjustment period that will cause a “zigzag” effect on the index in the near future.
She said most foreign investors would probably wait for a clearer picture of the consequences of the coup on the market before they come back, while the price-to-earnings ratio is still acceptable when compared with other markets in the region.