Frasers Centerpoint Ltd - DBS Research 2016-04-06: Strength in diversity

Frasers Centerpoint Ltd - DBS Research 2016-04-06: Strength in diversity FRASERS CENTREPOINT LIMITED TQ5.SI 

Frasers Centerpoint Ltd - Strength in diversity 


Growing developer with high yields. 

  • Frasers Centrepoint Limited (FCL) is one of the largest property developers in Singapore with asset size of over S$23bn as of 31st Dec’15. 
  • The group has a target to grow recurring revenues to 60-70% of PBIT in the medium term. To reach this target, 
    1. FCL will be 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, including the recent acquisition of the Malmaison Hotel du vin Group (MHDV). 
  • FCL is also one of the highest yielding property developer, offering an attractive prospective yield of > 5.0%. 

Golden Land acquisition to bring strategic synergies. 

  • The group acquired close to a 35% stake in Golden Land Property Development PCL (GOLD) and management believes that this acquisition offers good synergies to FCL as both companies share similar investment philosophies with an aim to continue growing its recurring income base. 
  • GOLD also offers FCL the ability to tap into the growing real estate market in Thailand, supported by favourable market fundamentals. 

Asset recycling into its listed S-REITs. 

  • FCL will continue to demonstrate its ability to capitalise value by strategically divesting matured assets to its listed REITs. The group is thus able to free up capital, improve its balance sheet position and recycle capital to projects with higher returns. 


Valuation: 

  • We have a BUY recommendation on FCL, with a 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 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 | Rachel Lih Rui Tan DBS Vickers | http://www.dbsvickers.com/ 2016-04-06
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 2.05 Same 2.05


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