Frasers Centrepoint Ltd - CIMB Research 2017-05-11: Boost From Overseas Units

FRASERS CENTREPOINT LIMITED TQ5.SI

Frasers Centrepoint Ltd - Boost From Overseas Units

1HFY17 net profit of S$258.8m within expectations at 47% of our FY17 forecast.
2Q Singapore PBIT was affected by the high base in the previous period; the launch of Seaside Residence was well-received with a strong take-up.
Australia residential contributions underpinned by strong settlements in 2HFY17.

We expect the Geneba acquisition to bolster international earnings in 2HFY17
Maintain Add with a higher TP of S$2.05. Downside risks are significant slowdown in residential sales.

FCL reported 2Q/1H net profit of S$71.2m/S$258.8m, making up 13%/47% of our FY17 forecast. We deem this in line given the lumpy residential contribution profile.
For 2Q, revenue and net profit dipped 21%/42% yoy on lower Singapore and international divisions, partly offset by higher Australia and hospitality SBUs.
The group proposed an interim DPS of 2.4Scts, unchanged over the previous period.

2Q PBIT saw a 29% dip yoy to S$84.8m on high residential base in previous year (Twin Fountain EC lumpy profits) and one-off revaluation and divestment gains.
Apart from eCO, FCL also progressively billed from North Park Residences.
Meanwhile, the launch of Seaside Residences in Apr was well received with a strong take-up rate of 50.5%. It plans to bolster residential inventory going forward.
Singapore recurrent income expanded yoy thanks to higher contributions from Centrepoint post AEI.

Australia 2Q PBIT more than doubled to S$54.9m, thanks to settlements of 520 units; with another 2,180 units to be settled in 2HFY17. It sold a further 618 units in 2Q and has $2.5bn of unrecognised revenue as at Mar 17.
The group plans to landbank in Sydney to bolster inventory for this location.
The investment property portfolio remains highly occupied at 94.4%, with a WALE of 4.8 years, giving good recurrent income visibility.

International division PBIT of S$18.3m in 2Q came largely from two residential projects – Seven Riverside Quarter and Camberwell on the Green in UK. A total of 55 units were settled in 1H and an additional 22 units were taken up. This was also underpinned by profits from Golden Land.
Going forward, we anticipate rental contributions from the recently-acquired Geneba Properties portfolio will impact earnings positively when the acquisition is completed in 2HFY17.

Hospitality’s 2Q PBIT jumped 51% yoy to S$32.6m led by higher income across the non-REIT portfolio, FHT and fee income, thanks to the newly-acquired Novotel Melbourne on Collins, Maritim Hotel Dresden as well as expended portfolio of managed properties. It is scheduled to open 8 new properties in FY17.

We tweak our FY17-19 forecasts to factor in the Geneba Properties’ acquisition.
We continue to like FCL for its strong recurrent income profile that makes up > 60% of PBIT and good development income visibility with S$3.4bn of unbilled residential sales. Its gearing of 72.7% is still healthy with debt headroom for potential acquisitions.
We raise RNAV by 2% to S$2.94 as we input our target prices of its listed REITs post results.
Maintain Add with a slightly higher TP of S$2.05, based on a 30% discount to RNAV.

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-05-11

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 2.05 Up 2.020