Frasers Centrepoint Ltd - DBS Research 2017-02-10: Prosperous start to the Rooster year

FRASERS CENTREPOINT LIMITED TQ5.SI

Frasers Centrepoint Ltd - Prosperous start to the Rooster year

We maintain our BUY rating on Frasers Centrepoint Ltd (FCL) for its attractive valuations at 0.7x P/NAV and 12x FY17F PE, and offering one of the highest dividend yields among developers at c.5.4%.
We expect re-rating catalysts to come from potential asset monetisation from ongoing strategies to crystallise value across its portfolio.

1Q17 net profit almost doubled (+90% y-o-y) to S$187.5m, making up 40% of street’s full year forecast.
The strong growth was driven by higher recognition of sale of development properties, largely contributed by the completion of Phase 3C1 of Baitang One in Suzhou, China (100% sold), and North Park Residences (76% sold), and sale of a bungalow at Holland Park.
1Q17 core PBIT (profit before interest and tax) from development properties more than tripled y-o-y to S$157m while recurring income from its investment properties (REITs and non-REITs) fell marginally by 3% y-o-y to S$182m.
Property sales volume in 1Q17 more than halved (62% y-o-y) due to slower sales in China. Unrecognised development revenue stood at S$3.2bn, mostly from Australia (S$2.3bn).

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

We maintain our BUY rating and target price at S$2.00 (30% discount to RNAV) from rolling forward our earnings estimates.

Dependent on the outlook of the Australian 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.

Rachel TAN DBS Vickers | Derek TAN DBS Vickers | http://www.dbsvickers.com/ 2017-02-10

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 2.000 Same 2.000