Frasers Centerpoint Ltd - DBS Research 2015-12-15: An Emerging Contender

Frasers Centerpoint Ltd - DBS Research 2015-12-15: An Emerging Contender FRASERS CENTREPOINT LIMITED TQ5.SI 

Frasers Centerpoint Ltd - An Emerging Contender 

Strong income visibility from locked-in residential sales. 

  • Frasers Centrepoint Limited (FCL) continues to offer strong earnings visibility by having locked-in almost c.S$3.5bn sales across its various major markets of Singapore, China and Australia. 
  • The group has executed well which enables it to substantially de-risk its exposures in the slowing residential market in Singapore, while its development projects in Australia are mainly in the mass- to mid-end segments which continue to deliver consistent sales. 


Growing recurring revenues from its commercial and hospitality divisions. 

  • The group has a long target to grow recurring revenues to 60% of total revenues in the medium term. To reach this target, FCL will be 
    1. completing a number of retail and office projects in Singapore by 2018, and 
    2. Frasers Hospitality is also expected to see its footprint expand to 30,000 managed units by 2019. 
  • In addition, the recent acquisition of the Malmaison Hotel du vin Group (MHDV), which has a portfolio of 29 boutique lifestyle hotels and 2,082 keys within 25 regional cities in the UK, will further deepen its presence and clientele reach in Europe. 

Tapping on existing capital-recycling platforms. 

  • FCL currently performs capital recycling through its listed REITs which the group can opportunistically divest mature yield properties to free up capital and reinvest in other higher-ROE projects. 

Valuation: 

  • We have a BUY recommendation on FCL, with a revised target price of S$2.05 based on a 30% discount to RNAV. 
  • We think that FCL is attractive at 0.7x P/Bk NAV and believe that the stock is trading at this level largely due to its tight liquidity constraints. 

Key Risks to Our View: 

  • Dependent on the outlook of Australia's real estate market, currency outlook. 
  • The group derives an estimated 30% of PBIT and 35% from Australia which is dependent on the real estate market and whose returns could be impacted by the weakening AUD/SGD exchange rate.


Derek Tan DBS Vickers | Mervin Song CFA DBS Vickers | http://www.dbsvickers.com/ 2015-12-15
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 2.05 Down 2.36


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