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
- completing a number of retail and office projects in Singapore by 2018, and
- 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
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Mervin Song CFA
DBS Vickers
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http://www.dbsvickers.com/
2015-12-15
DBS Vickers
SGX Stock
Analyst Report
2.05
Down
2.36
