SINGAPORE (Feb 20): CGS-CIMB Research is maintaining its “add” call on Frasers Property with a target price of $2.08, following the announcement of the group’s 1Q earnings results.
Frasers Property reported a 76.1% y-o-y increase in its 1Q19 earnings to $145.6 million, along with a 44.7% jump in revenue to $1.08 billion. Profit before interest and tax (PBIT) was 50.7% higher y-o-y at $354.4 million.
See: Frasers Property reports 76% rise in 1Q earnings to $146 mil
The strong performance came largely from the group’s Australia residential and China operations, while 63% of 1Q19 PBIT came from recurring sources.
During the quarter, PBIT from the group’s Australia residential operations doubled to $139.4 million, due to strong residential contributions. Frasers Property Australia settled 580 units in 1Q19 and has 1,720 more units to be handed over for the remainder of the financial year.
The group has already sold 319 units during the quarter and intends to release another 2,000 more unites for the remainder of the financial year. As at end-Dec 2018, the group has $1.1 billion of unrecognised revenue from its Australia residential operations.
The commercial and industrial operations also benefited from higher average portfolio occupancy.
Meanwhile, PBIT from the group’s Singapore operations saw a slight 0.8% y-o-y growth to $101.6 million, due to higher trail and commercial income, namely from maiden contributions from Frasers Tower and Northpoint City south wing. But this was partially offset by lower residential contributions, as most of its residential projects are completed.
The group plans to launch the 455-unit Riviere in 1H19. In a Feb 13 report, analyst Lock Mun Yee says, “We anticipate this development to benefit from its attractive location along the Singapore River.”
In the UK, Frasers’ hospitality business saw an improvement, due to higher inbound tourism flow, as a result of a weaker GBP, while in Europe, the group’s properties benefitted from higher leisure and business demand.
Additionally, PBIT from the group’s China residential operations turned around as 84 units were handed over. There is currently $0.3 billion of unrecognised development revenue in China as at end-1Q19.
“We leave our FY19-21F earnings unchanged post results given expectations of lumpy residential earnings,” says Lock.
As at 3.35pm, shares in Frasers Property are trading at $1.74, or 0.50 times FY19 book with a dividend yield of 5.09%.
