SINGAPORE (April 7): DBS is maintaining its “buy” on Frasers Centrepoint Limited (FCL) with a target price at $2.00 for its attractive valuations and 5% dividend yield which is one of the highest among developers.
In a Friday report, analyst Rachel Tan says FCL is trading at 0.7x P/NAV and 12x FY17F PE.
While most developers have re-rated to an average of 0.9x P/NAV following the government’s recent tweaking of property measures, FCL has lagged behind.
This means the market has broadly overlooked the potential of its upcoming Singapore projects, says the analyst.
Tan expects Seaside Residences, FCL’s latest residential project which is launching soon, to receive good buyer interest.
In addition, Frasers Tower, the only major building completing in the CBD in 2018, should do well in the midst of a drop off in competitive supply that year.
Tan sees the two well-timed projects entering the market as re-rating catalysts for the stock.
“Historically, we have seen that strong property sales translate to higher prices for FCL,” she says.
FCL will continue to demonstrate its ability to crystallise value by strategically divesting matured assets to its listed REITs.
Potential assets include Waterway Point and Northpoint City.
“We maintain our ‘buy’ rating and target price at $2.00 (30% discount to RNAV) from rolling forward our earnings estimates,” says Tan.
Shares of FCL are trading at $1.76.
