Frasers Centrepoint Ltd - CIMB Research 2017-08-08: 3QFY9/17 Boosted By Australia

FRASERS CENTREPOINT LIMITED TQ5.SI

Frasers Centrepoint Ltd - 3QFY9/17 Boosted By Australia

Frasers Centrepoint Ltd (FCL)'s 3QFY9/17 core earnings were within our expectation, at 37% of our FY17 forecast.
9MFY17 core earnings at 82% of our FY17 forecast.
Australia delivered strong performance, thanks to gain from sale of student accommodation and higher residential profit contributions.

FCL reported 18.4% yoy rise in 3QFY9/17 net profit to S$182.4m on a doubling in revenue to S$1,398.6m.
Stripping out fair value gains and exceptional items, the yoy improvement would have been an impressive 168%.
The better results were ahead our expectations, with core earnings at 37% of our FY17 forecast, largely due to stronger-than-expected performance by its Australia and international business divisions.

Australia delivered a strong 3QFY17 PBIT of S$161m (vs. S$29m in 3QFY16) with a one-off S$40m net gain from the sale of the student accommodation components at Central Park. In addition, there was higher handover of 870 units (vs. 820 units in 1HFY17).
The group also sold a further 560 units in 3QFY17 and plans to release another 1,355 units for sale in the remainder of FY17. It has unrecognised residential revenue of S$2.3bn as at end-3QFY17.

The international business division delivered a strong 3QFY17 PBIT of S$87.1m, underpinned by robust handover of residential units in China and the UK as well as better results from Golden Land and TICON. However, the pace of new sales in the UK had slowed owing to macro uncertainties.
That said, acquisition of the Geneba portfolio of logistics assets in July would likely provide a new source of contributions for this division.

Singapore 3QFY17 PBIT declined yoy, dragged down by lower residential profits, mainly from progressive billings from North Park Residences, albeit partly offset by higher rental and fee income.
FCL has unbilled residential revenue of S$0.8bn as at end-3QFY17, coming from the sale of Seaside Residences units. The development is 52% taken up since its launch in April. The group would continue to maintain a cautious stance towards restocking inventory in Singapore given the competitive land banking environment.

We adjust our FY17F EPS to include profit from the sale of the student accommodation components at Central Park.
We increase our RNAV to S$2.99 following the adjustment in TP of the FCL-sponsored S-REITs post results. Our revised TP of S$2.09 is premised on a 30% discount to RNAV.
We continue to like FCL for its active capital deployment and healthy balance sheet with net debt to equity at 70.5%.
Potential re-rating catalysts: increasing share free float and liquidity. Downside risks: slowdown in capital deployment.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-08-08

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