SINGAPORE (May 7): CGS-CIMB continues to rate Frasers Property Limited (FPL) “add” with a target price of $2.08, following the group’s 2Q19 results announcement.
Last Friday, the group reported 2Q19 earnings of $120.5 million, 8.3% higher y-o-y, bringing 1H19 earnings to $266 million, 37.2% higher than a year ago.
Revenue for 2Q19 increased 11.1% to $934.3 million while revenue for 1H19 increased 26.9% to $2.0 billion.
The group declared an interim dividend of 2.4 cents, unchanged from a year ago.
See: Frasers Property reports 8.3% higher 2Q earnings of $120.5 mil on Aussie sales and settlements
FPL’s Singapore operation was dragged down by lower residential contributions due to the completion of North Park Residences. But this was partially offset by higher rental income with the commencement of Frasers Tower and Northpoint City South Wing, and better REIT income.
The group’s Seaside Residences project is currently about 87% sold, while unrecognised residential sales of $0.2 billion remains as at end-2Q19. The launch of the 455-unit Riviere is also coming up, but a date has yet to be indicated.
Overall,occupancy of FPL's Singapore retail and office portfolio improved y-o-y with rental reversions of -0.4% to 5%.
Over in Australia, higher residential and REIT contributions offset slower commercial and industrial development income. During the quarter, a further 585 residential units were settled; it remains on track to hand over 2,300 units in FY19.
However, the pace of new sales slowed with an additional 155 units taken up in 2Q19. The group lowered its planned release to 1,590 units, compared to a 2,300 target earlier.
In a recent report, analyst Lock Mun Yee says, “Nonetheless, it continues to have a high amount of unbilled sales of $0.9 billion as at end-2Q19.”
Meanwhile, revenue and PBIT from the group’s hospitality strategic business unit (SBU) come in flat y-o-y, while its Europe and rest of Asia division’s performance weakened due to lower contribution from China and Europe, following asset recycling initiatives and divestments.
As at end-March, the group’s net debt to equity ratio stood at 84.2%, following its recent acquisition of a 47.82% stake in PGIM Real Estate AsiaRetail Fund for $960 million, as well as the commencement of the sale process of three Australian retail assets.
“We anticipate the group’s net debt to equity position to tick higher when these transactions are factored in,” says Lock.
As at 4.40pm shares in FPL are trading at $1.85 or 0.55 times FY19 book with a dividend yield of 4.65%.
