SINGAPORE (May 11): CGS CIMB continues to like Frasers Property Limited for its strong recurring income base which makes up 71% of operating PBIT.
FPL recently announced the proposed divestment of 21 logistics facilities in Germany and Netherlands to Frasers Logistics Trust for €316.2 million ($503.3 million).
Analyst Lock Mun Yee is tweaking her FY18-20F earnings to factor in the divestment. “We maintain our ‘add’ rating and target price of $2.40,” says Lock in a Thursday report.
CGS CIMB says Singapore’s 2Q PBIT rose 17% y-o-y, thanks to greater residential and rental contributions and progressive sales and billings from North Park Residences and Seaside Residences which were 70% sold.
Looking ahead, sales from Parc Life EC will be recognised in 3Q18 after its completion in end 2Q18. The Jiak Kim St site is also slated for launch in 1H19. Frasers Tower is expected for completion in 1H18.
In Australia, PBIT jumped 60% y-o-y to $88 million thanks to higher residential, commercial & industrial and REIT contributions. In 2Q, 624 homes were handed over with unrecognised revenue of $1.9 billion as at end 2Q.
In 2H18, owners will settle into another 1,656 units. In the commercial and industrial segment, it has a further 14 facilities to be delivered over the next 15 months, with an estimated GDV of $460 million. Occupancy for office portfolio remains at 97.4%.
Meanwhile, the hospitality division saw a 30% decline in PBIT in 2Q, largely affected by lower F&B revenue at the Malmaison Hotel du Vin properties in the UK as well as pre-opening expenses from the Frasers Suites Dalian. Fee income was also lower in 2Q.
PBIT from Europe/rest of Asia surged to $93.6 million thanks to inclusion of income from Geneba Properties and contributions from business parks in the UK. There was also settlement of 130 units from P3 Baitang One and P4 Chengdu Logistics Hub while Thailand and Vietnam saw higher income from Golden Land and TICON.
To recap, FPL reported 2Q18 revenue of $841.7 million, 19% y-o-y, while core net profit rose 74.5% y-o-y to $124.2 million, thanks to improvement in Singapore, Australia and Europe/rest of Asia operations.
For 1H18, core net profit showed a 23.6% decline to $193.4 million due to a high base in the previous year from lumpy overseas development profits. 1H recurrent income formed 71% of PBIT. The group has proposed an interim DPS of 2.4 cents.
Upside catalysts include capital recycling to lower its current net debt-to-equity ratio of 95.3% while downside risks include forex volatility given 70% of its PBIT is derived outside of Singapore.
As at 4.37pm, shares in FPL are trading 1 cent higher at $1.96, giving it a FY18 dividend yield of 4.39%.
