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Frasers Centerpoint Ltd - DBS Research 2016-05-11: High yielding developer

Frasers Centerpoint Ltd - DBS Research 2016-05-11: High yielding developer FRASERS CENTREPOINT LIMITED TQ5.SI 

Frasers Centerpoint Ltd - High yielding developer 

  • 1H16 earnings in line; stronger 2H expected 
  • Stable outlook with recurring income base forming a majority part of earnings 
  • Asset recycling to its REITs is a key strategy to realise value 


Growing developer with high dividend yields. 

  • We continue to like Frasers Centrepoint Limited (FCL) for its attractive valuations at 0.7x P/NAV offering one of the highest dividend yields amongst developers at c. 5.1%. 
  • We see re-rating opportunities coming from potential asset monetisation from ongoing strategies to crystallise value across it portfolios. 

Strong earnings visibility. 

  • The group is on track towards its target to grow recurring revenues to contribute 60-70% of profit before interest and tax (PBIT) in the medium term while its property development division continues to offer strong earnings visibility with close to S$3.6bn of sales that is already locked in, to be recognised in the next few years. 
  • Recurring income will come from incremental revenues from Waterway Point in Singapore (completed) while completions of The Centrepoint, Northpoint Mall and Fraser Tower over 2017- 2018 will drive recurring incomes and profitability higher. 

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. 
  • FCL is attractive at 0.7x P/Bk NAV and we believe that the stock is trading at this level largely due to its tight liquidity. 

Key Risks to Our View: 

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



Derek Tan DBS Vickers | Rachel Lih Rui Tan DBS Vickers | Mervin Song CFA DBS Vickers | http://www.dbsvickers.com/ 2016-05-11
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 2.05 Same 2.05


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