Frasers Centrepoint Ltd - Boost From Overseas Units
- 1HFY17 net profit of S$258.8m within expectations at 47% of our FY17 forecast.
- 2Q Singapore PBIT was affected by the high base in the previous period; the launch of Seaside Residence was well-received with a strong take-up.
- Australia residential contributions underpinned by strong settlements in 2HFY17.
- We expect the Geneba acquisition to bolster international earnings in 2HFY17
- Maintain Add with a higher TP of S$2.05. Downside risks are significant slowdown in residential sales.
2QFY17 net profit lower on Singapore and international SBUs
- FCL reported 2Q/1H net profit of S$71.2m/S$258.8m, making up 13%/47% of our FY17 forecast. We deem this in line given the lumpy residential contribution profile.
- For 2Q, revenue and net profit dipped 21%/42% yoy on lower Singapore and international divisions, partly offset by higher Australia and hospitality SBUs.
- The group proposed an interim DPS of 2.4Scts, unchanged over the previous period.
Successful launch of Seaside Residence Singapore
- 2Q PBIT saw a 29% dip yoy to S$84.8m on high residential base in previous year (Twin Fountain EC lumpy profits) and one-off revaluation and divestment gains.
- Apart from eCO, FCL also progressively billed from North Park Residences.
- Meanwhile, the launch of Seaside Residences in Apr was well received with a strong take-up rate of 50.5%. It plans to bolster residential inventory going forward.
- Singapore recurrent income expanded yoy thanks to higher contributions from Centrepoint post AEI.
Stronger Australia residential settlements in 2HFY17
- Australia 2Q PBIT more than doubled to S$54.9m, thanks to settlements of 520 units; with another 2,180 units to be settled in 2HFY17. It sold a further 618 units in 2Q and has $2.5bn of unrecognised revenue as at Mar 17.
- The group plans to landbank in Sydney to bolster inventory for this location.
- The investment property portfolio remains highly occupied at 94.4%, with a WALE of 4.8 years, giving good recurrent income visibility.
Geneba to bolster international contributions
- International division PBIT of S$18.3m in 2Q came largely from two residential projects – Seven Riverside Quarter and Camberwell on the Green in UK. A total of 55 units were settled in 1H and an additional 22 units were taken up. This was also underpinned by profits from Golden Land.
- Going forward, we anticipate rental contributions from the recently-acquired Geneba Properties portfolio will impact earnings positively when the acquisition is completed in 2HFY17.
Growing hospitality footprint
- Hospitality’s 2Q PBIT jumped 51% yoy to S$32.6m led by higher income across the non-REIT portfolio, FHT and fee income, thanks to the newly-acquired Novotel Melbourne on Collins, Maritim Hotel Dresden as well as expended portfolio of managed properties. It is scheduled to open 8 new properties in FY17.
- We tweak our FY17-19 forecasts to factor in the Geneba Properties’ acquisition.
- We continue to like FCL for its strong recurrent income profile that makes up > 60% of PBIT and good development income visibility with S$3.4bn of unbilled residential sales. Its gearing of 72.7% is still healthy with debt headroom for potential acquisitions.
- We raise RNAV by 2% to S$2.94 as we input our target prices of its listed REITs post results.
- Maintain Add with a slightly higher TP of S$2.05, based on a 30% discount to RNAV.