Frasers Property Limited - CGS-CIMB Research 2020-08-11: Mixed Operational Performance

FRASERS PROPERTY LIMITED (SGX:TQ5)

Frasers Property Limited - Mixed Operational Performance

In its 3Q (Apr 2020 to June 2020) and 9MFY20 (Oct 2019 to Jun 2020) business update, Frasers Property (SGX:TQ5) shared that its retail property occupancy in Singapore and Australia was lower y-o-y, while its Singapore commercial portfolio saw an uptick in take-up rate.
Occupancy for its Australia logistics and industrial portfolio slipped marginally y-o-y, while its Europe portfolio occupancy was stable.
Hospitality operations were impacted by the COVID-19 outbreak, resulting in lower occupancy and average room rates in 3QFY20.
Frasers Property’s residential presales totaled S$1.4bn at end-Jun 2020, largely from Australia. Net debt-to-equity ratio post-divestment of its 50% stake in Northpoint City South Wing was c.107% at end-Jun 2020.

Frasers Property settled 936 residential units in Australia in 9MFY20 and plans to hand over a further 700 units in 4Q. It sold 933 homes in 9MFY20 and has a remaining S$1bn of residential pre-sales to be recognised at end-3QFY20. It has a residential pipeline of 17,050 units at end-3QFY20 and will calibrate the level of residential launches amid the current softer economic environment.
In Singapore, the Seaside Residences has achieved close to a 95% sales rate and is on schedule to be completed in 2HCY20. The group is also planning for its 500-unit executive condominium (EC) site at Fernvale Lane, acquired in 2QFY20, which would replenish its pipeline.
In China, Frasers Property launched and sold c.94% of the 269-unit Opus One in Xuhui, at an average ASP of Rmb99,500 psm.

Frasers Property's industrial and logistics portfolio remained robust, with active leasing activities in 3Q and limited rental support required. It is also developing seven new assets, planned for completion over the next 12 months, and added a total of 13ha of industrial land bank in Australia and Germany in 9MFY20.
For Frasers Property Thailand, the diversified portfolio provided resilience, with a decline in warehouse occupancy offset by an increase in factory take-up rate.

In 3QFY20, hospitality assets across its geographic footprint saw a 20-85% pt decline in occupancy, while average room rate was flat in Europe and 39.3% lower y-o-y in Asia Pacific, ex-North Asia. Given the challenging operating environment, Frasers Property is actively reviewing cost-management measures and focusing on re-opening its properties in UK and Europe. It also plans to open two new properties in Leipzig and Tokyo in 2020 to capture domestic tourism opportunities.

We lower our Frasers Property's FY20-22F EPS by 1.3-12.1% on slimmer projected hospitality margins and update for the latest REIT contributions. Our RNAV/Target Price remains unchanged at S$3.09/S$1.70, assuming an unchanged 45% discount to RNAV. See PDF report attached below for the breakdown of Frasers Property's RNAV.
See Frasers Property Share Price; Frasers Property Target Price; Frasers Property Analyst Reports; Frasers Property Dividend History; Frasers Property Announcements; Frasers Property Latest News.
Active capital deployment is a potential upside catalyst.
Downside risks: slower value unlocking activities due to the weaker macro outlook.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-11

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