Frasers Property Limited - CGS-CIMB Research 2020-02-10: Boosted By China Residential

FRASERS PROPERTY LIMITED (SGX:TQ5)

Frasers Property Limited - Boosted By China Residential

Frasers Property Limited (SGX:TQ5)'s 1QFY9/20 EPS of 4.2 Scts beat our expectations, at 46% of our FY20F.
Better China and Singapore residential contributions as well as higher Thailand performance boosted bottomline.
We reiterate our ADD rating with an unchanged target price based on a 35% discount to RNAV.

Frasers Property’s 1QFY9/20 core net profit of S$142.2m was above our expectations, at 46% of our FY20F forecast, boosted by higher than expected residential settlements in China, maiden contributions from PGIM Real Estate Asia Retail Fund’s (PGIM) retail assets and consolidation of Golden Land Ltd (GOLD TB). This was partly offset by lower contributions from Australia.

Singapore PBIT, which made up 29% of total PBIT in 1QFY9/20, increased 32% y-o-y to S$134.1m on slightly better residential contributions with progressive recognition of Seaside Residences and Riviere as well as contribution from PGIM. This was partly offset by lower commercial income due to dilution of stake in Frasers Tower.
According to management, about 10.5% of Riviere had been sold to date. We anticipate Singapore SBU’s earnings growth to stay subdued in the near term, with an estimated remaining S$0.2bn worth of unrecognised residential revenue at end-1Q.

Australia PBIT declined c.59% y-o-y in 1QFY20, due to a lower number of residential units settled (382 units in 1QFY2019 vs. 580 in 1QFY19). The group sold 290 units in 1Q, part of its FY20F annual target of 1,750 units for release. It plans to settle 1,950 units in FY20F and had S$0.9bn unrecognised revenue at end 1Q.
According to management, the Australian residential market appears to be bottoming out.

China PBIT surged 186% y-o-y to S$126.5m, thanks to profit recognition from 232 residential units from P3C2 Baitang One in Suzhou. Furthermore, progressive recognition of the S$136m bulk sale at Chengdu Logistics Hub P3 should also continue to underpin profits.
Thailand and Vietnam operations also reported higher contributions with the consolidation of GOLD from Aug 2019.

We lift our FY20-22F core EPS by 84.8%/24.1%/3.1% post results, to factor in the lumpy China residential contribution. However, as these shifts are more a function of timing of recognition, our RNAV remains unchanged at S$3.20.
Our Target Price is based on a 35% discount to RNAV similar to other developer peers.
Frasers Property’s net debt to equity ratio stood at 92.2% at 1QFY20, one of the highest amongst listed peers. Active capital deployment is a potential re-rating catalyst, while downside risks include slower value-unlocking activities due to the weaker macro outlook.
See Frasers Property Share Price; Frasers Property Target Price; Frasers Property Analyst Reports; Frasers Property Dividend History; Frasers Property Announcements; Frasers Property Latest News.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-02-10

SGX Stock Analyst Report ADD MAINTAIN ADD 2.080 SAME 2.080