Frasers Property Limited - CGS-CIMB Research 2021-08-10: Improved Balance Sheet Metrics

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FRASERS PROPERTY LIMITED (SGX:TQ5)

Frasers Property Limited - Improved Balance Sheet Metrics

• Frasers Property’s gearing improved to 80.8% post-rights issue in Apr 2021.
• It saw better residential performance in 3QFY21, with some occupancy volatility in its Australia commercial assets.
• Reiterate ADD rating on Frasers Property, with an unchanged target price of S$1.41.

Frasers Property's 3QFY21 business update

• In its 3QFY21 (Apr 2021 to Jun 2021) business update, Frasers Property (SGX:TQ5) shared that its quarter-end net debt-to-equity ratio improved to 80.8% (vs 99.3% in 2QFY21) post-completion of its rights issue in Apr 2021. Interest cover stands at a healthy 4x.
• Management indicated that ~S$700m has been earmarked to grow its logistics and industrial (L&I) and business park portfolio.

Unbilled sales of S$1.8bn at end-3QFY21, strong sales in Australia

• As at end-3QFY21, Frasers Property had S$1.8bn worth of unbilled residential sales group-wide, of which ~78% is from Australia.
  • Sales at Singapore’s Riviere ticked up to 27.9% as at end- 3QFY21. Parc Greenwich Executive Condo is scheduled for launch by end-2021, while the redevelopment of Bedok Point Mall is still in planning progress.
  • In Australia, Frasers Property settled 1,513 units for 9MFY21 (3QFY21: 513 units) and has an outstanding S$1.4bn of unbilled revenue; it is scheduled to settle another 840 units in 4QFY21. Sales was robust, reaching 2,114 units as at end-3QFY21. It plans to undertake a 354 built-to-rent pilot project for the Queensland Government; on completion, the group will own and operate the assets, with the government subsiding rental for qualified tenants across 40% of the building.
  • In Thailand, it settled 2,210 units and sold 5,378 units in 9MFY21.

High occupancy amid leasing activity in the Logistics & Industrial (L&I) portfolio

• The L&I portfolio remained robust, with a high occupancy rate of 97-100% as at end- 3QFY21, amid strong leasing activity. Frasers Property is developing 13 new assets totaling 384k sq m, to be completed over FY21-22F.
• Frasers Property will continue on its strategic initiative to grow its L&I base and has added 626k sq m of land bank in Europe and Australia.
• Thailand industrial portfolio occupancy stayed stable at ~81%. Australia commercial portfolio saw some occupancy volatility to 80.6%, due to vacancies across Rhodes Corporate Park, while the take-up at Thailand’s office and retail remained high at ~94%.

Slight improvement in hospitality RevPAR, although still down y-o-y

• The hospitality segment saw a slight improvement, especially in Europe, thanks to improved domestic demand, although RevPAR remained lower y-o-y by 22.4-44.1% (vs. down 18.3-74.2% y-o-y as at end 2QFY21) across its geographical footprint.
• Frasers Property continues to strengthen the positioning of its brands and loyalty programme to improve customer engagement and conversion.

Reiterate ADD rating for Frasers Property

• See
  • Frasers Property's Share Price,
  • Frasers Property's Target Price,
  • Frasers Property's Analyst Reports,
  • Frasers Property's Dividend History,
  • Frasers Property's Announcements,
  • Frasers Property's Latest News.
• We leave our FY21-23F EPS estimates for Frasers Property unchanged. Our RNAV/target price for Frasers Property remains unchanged at S$2.57/S$1.41, assuming an unchanged 45% discount to RNAV.
• 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 2021-08-10

SGX Stock Analyst Report ADD MAINTAIN ADD 1.410 SAME 1.410