Frasers Property Limited - CGS-CIMB Research 2019-11-18: Dragged By One-Offs


Frasers Property Limited - Dragged By One-Offs

  • Frasers Property Limited’s 4QFY19 core EPS of 8.7 Scts was below our expectations.
  • Slow residential sales and one-offs were a drag on financial performance, partly offset by recurrent rental and fee income.
  • Maintain ADD with an unchanged Target Price of S$2.08.

FY9/19 results highlights

  • FRASERS PROPERTY LIMITED (SGX:TQ5)'s FY9/19 core net profit of S$350m came in below expectations, dragged by c.S$94m of write-downs to net realisable value of properties held for sales, lower Singapore and Australia residential contributions and higher interest expense. This was partly offset by maiden contributions from PGIM ARF, higher recurring profits from Singapore and UK and increased income from Thailand due to consolidation of Golden Land’s profits. See Frasers Property Announcements.
  • Frasers Property Limited proposed a lower final DPS of 3.6 Scts, bringing full-year DPS to 6 Scts. See Frasers Property Dividend History.

Singapore impacted by project completion and slow sales

  • Singapore PBIT dipped 3.8% y-o-y in FY19 on lower residential contributions with the completion of Northpark Residences and slow sales pace at Riviere. This was partly offset by maiden contributions from PGIM ARF, rental income from Frasers Tower and Northpoint City South Wing, and increased REIT distributions and fee income.
  • With the recently-launched Riviere achieving an estimated 8% take-up rate to date, we anticipate Singapore SBU’s contribution to remain subdued in the near term.

Australia residential dragged by write-downs

  • Australia PBIT declined c.19% y-o-y in FY19, due in part to a write-down of net realisaable value of properties held for sales, lower number of residential units settled (1,675 units in FY19 vs. 3,040 in FY18) and lower commercial & industrial (C&I) development earnings. The group sold 1,014 units in FY19 (344 in 4Q) and plans to release a further 2,000 units in FY20.
  • With a planned settlement of 1,950 units in FY20, we anticipate a modest showing from this division going forward. Nonetheless, the Australian residential market appears to be bottoming out and the group had continued restocking its residential and industrial land bank with the addition of 3,791 residential units in FY19.

Hospitality, Europe and rest of Asia outperformed

  • Hospitality, Europe and rest of Asia outperformed with y-o-y improvements in PBIT in FY19. The hospitality division reported stable earnings with the opening of Frasers Suites Dalian.
  • China development contributions increased y-o-y thanks to profit recognition from its projects in Suzhou, Chengdu Logistics Hub and Gemdale Megacity, while Europe benefited from rental income from business parks, industrial and logistics properties as well as consolidation of Golden Land’s profits.

Maintain ADD

  • We adjust our FY20F/21F core EPS by -13.2%/+3.7% post results, to factor in slower residential contributions. However, as these shifts are more a function of timing of recognition, our RNAV and Target Price remain unchanged at S$3.20/S$2.08, based on a 35% discount to RNAV. See Frasers Property Share Price; Frasers Property Target Price,
  • Frasers Property Limited’s net debt to equity ratio stood at 85.9% at end-FY19. Active capital deployment is a potential re-rating catalyst, while downside risks include slower activities due to the weaker macro outlook.

LOCK Mun Yee CGS-CIMB Research | 2019-11-18
SGX Stock Analyst Report ADD MAINTAIN ADD 2.080 SAME 2.080