Frasers Property Limited - CGS-CIMB Research 2020-11-11: Dragged By One-Offs


Frasers Property Limited - Dragged By One-Offs

  • Frasers Property's 2H/FY20 core EPS of 0.4/6.2 cents was below our expectations.
  • Higher industrial, Thailand contributions; lower residential, retail, hospitality.
  • Reiterate ADD with an unchanged target price of S$1.70.

Frasers Property's 2H/FY20 results highlights

  • Frasers Property (SGX:TQ5) reported 2HFY20 net loss of S$45.7m on a 17.5% y-o-y decline in revenue to S$1.46bn. See Frasers Property Announcements. The drag was due to lower hospitality and retail rental income and exceptional loss of S$142m, largely from impairment of property, plant and equipment. This was partly offset by higher contributions from AsiaRetail Fund as well as revaluation uplift from investment properties. Excluding the one-offs, net profit would have been S$11.5m, -89.6% y-o-y.
  • Frasers Property's FY20 net profit of S$188.1m was 66.4% lower y-o-y (S$229.2m excluding one-offs, - 34.5% y-o-y).
  • Frasers Property proposed a lower final dividend of 1.5 cents. See Frasers Property Dividend History.

Industrial continues to shine

  • The best performing business segment was industrial, delivering a 42.2% y-o-y higher FY20 PBIT to S$351.1m, thanks to higher contributions from the completion of built-to-suit projects, sale of land lots in Australia and expanded Frasers Logistics & Commercial Trust (SGX:BUOU) income base post-merger.
  • Operationally, the industrial portfolio enjoyed high and stable occupancy with strong leasing activity. It is also developing eight new industrial assets in Australia and Germany, which are scheduled to be delivered in FY21-22F.
  • Frasers Property Thailand (FPT) also benefited from the merger with Golden Land in Aug 2019. Given FPT’s diversified portfolio, including residential, industrial and commercial assets, we believe it will likely enjoy operational resilience while benefiting from the strong demand for industrial/logistics assets and improving buyer sentiment in the residential market.

Higher Australia residential settlements expected in FY21F

  • On the residential front, Frasers Property sold 59 units in Singapore, from Seaside Residences (94.9% sold) and Riviere (12.5% sold). The group is also planning for its 496-unit executive condominium (EC) site at Fernvale Lane, acquired in 2QFY20.
  • In Australia, it settled 1,595 units in FY20 and plans to hand over 1,955 units in FY21F. It has a remaining S$1.1bn of unrecognised revenue from Australia residential projects as at end-FY20 and will continue to pro-actively manage settlement risks.

Slow recovery for hospitality

  • Hospitality FY20 PBIT declined 85.1% y-o-y to S$19.6m as occupancies were impacted by the COVID-19 pandemic, dragged by a 31.4-44.3% y-o-y decline in RevPAR across its portfolio.
  • Looking ahead, apart from timing new openings or re-openings of its properties, it is continuing to develop marketing campaigns to tap into domestic travel as well as actively planning for regional and global campaigns to prepare for upcoming travel corridors while concurrently reviewing cost management measures.

Reiterate ADD rating on Frasers Property Limited

LOCK Mun Yee CGS-CIMB Research | 2020-11-11
SGX Stock Analyst Report ADD MAINTAIN ADD 1.700 SAME 1.700