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