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Frasers Centrepoint Ltd - CIMB Research 2016-02-05: A short term hiccup

Frasers Centrepoint Ltd - CIMB Research 2016-02-05: A short term hiccup FRASERS CENTREPOINT LIMITED TQ5.SI 

Frasers Centrepoint Ltd - A short term hiccup 

  • Volatility in residential earnings drag down performance 
  • Project completions and progressive billings to improve Singapore’s income outlook 
  • FPA residential contributions skewed towards 4QFY16 
  • Mid-term acceleration in commercial property earnings as new buildings complete 
  • Maintain Add with RNAV-based target price of S$2.04 


■ Results below expectations on timing of development profits 

  • FCL’s 1QFY16 net profit fell 38% yoy to S$90.3m on a 37% lower revenue of S$671.6m reflecting lower residential contributions from Singapore and China due to the timing of recognition of billings, while in Australia, there was a high base with the large number of completions in the previous period. 
  • This was partly offset by higher commercial property contributions and higher hospitality income, thanks to organic growth and the inclusion of profits from the recently-acquired Malmaison and Hotel du Vin hotels. 

■ Singapore contributions to increase with more completions 

  • While 1Q’s net profit accounted for only 15% of our FY estimates, we retain our projections as development contributions are expected to be largely back-end loaded. 
  • In Singapore, the completion of three projects, including recognition of 100% of profits from Twin Fountains EC and progressive billings from ongoing developments should underpin forward earnings. 
  • Planned roll out of the 628-unit Parc Life EC in 2QCY16 and purchase of a 40% share in the Siglap Rd site (800-900 units) has extended its earnings visibility. 

■ Bulk of Australia residential handovers in 4QFY16 

  • The group handed over 500 units in 1Q, and has 2,500 units left to be delivered for the rest of the year, mainly in 4QFY16. Hence, we anticipate Australia residential profits to be skewed. 
  • FPA sold 843 units in 1Q and plans to release another 2,500 units for sale this FY. This would further bolster its unrecognised revenue of S$1.8bn at end Dec 15. 
  • Its logistics and office portfolio remains highly occupied at 97.8% and offers a stable recurrent income base. 

■ Recurrent income base to strengthen 

  • Excluding revals, the commercial property division reported a low single-digit improvement as Centrepoint undergoes AEI. 
  • We anticipate this division to pick up strongly in the medium term, with the completion of North Park City and Frasers Towers by FY19. 
  • The hospitality division is also projected to expand its room count from the present 14,000 to 22,700 when they fully opened. 

■ Maintain Add 

  • We continue to like FCL for its strong recurrent income base, that made up 82% of its current PBIT. 
  • While its current gearing of 84% is higher than its peers, potential exercises, such as value unlocking of its Australian logistics portfolio, should enable the group to recycle some capital for its capex needs and act as a catalyst for its share price. 
  • We maintain our Add rating with an unchanged RNAV-backed target price of S$2.04.



LOCK Mun Yee CIMB Securities | YEO Zhi Bin CIMB Securities | http://research.itradecimb.com/ 2016-02-05
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 2.04 Same 2.04


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