The results briefing of Frasers Property (FPL) on May 12 was initially thought to be a run-of-the-mill update on its operations and financials, so much so that a few analysts moved on to other results briefings which are often on Zoom or Webex. And indeed, there were questions on Bedok Point, residential landbanking, executive condominium strategy, and so on.
Around half an hour into the question-andanswer session, a couple of questions from media and analysts hovered around FPL’s share price and its deep discount to its net asset value (NAV). As at March 31, FPL’s NAV stood at $2.73. Since then, FPL has had a 37-for-100 shares rights issue priced at $1.18. The pro forma ex-rights NAV is $2.25, according to the rights issue announcement. FPL last traded at $1.19, or 0.53 times its post-rights NAV.
While most rights issues usually enhance liquidity, FPL’s deeply discounted rights tightened liquidity as the subscription rate was 90.6%. As a result, the Sirivadhanabhakdi family has raised its stake from a deemed interest in FPL of 86.63% to 88.89% — through a private company, TCC Assets, and Thai Beverage.
“We actively structure ourselves to see the way to enhance and unlock value. There will be a review of how we could see our value unlocked, whether it’s through the shareholder belief in creating longerterm value with a larger free float, or at FPL, in my capability to build and unlock through different platforms and vehicles that allow us to grow better returns to shareholders,” says Panote Sirivadhanabhakdi, group CEO at FPL.
Panote is aware that a deep liquid market helps to realise value. “There has to be better liquidity to let the share perform better. My job is to make sure I continue to create value until the shareholder sees this, and shareholders are confident with the way we are going and willing to put more money into the company. We will do our best to make sure our value is being recognised by the investor,” he elaborates.
“The group is structured to actively explore all opportunities to enhance and unlock value for shareholders. On the topic of increasing the group’s free float, it will ultimately depend on whether and when the shareholder believes that a larger free float will create longer-term value,” an FPL spokesman clarifies.
In April, FPL raised approximately $1.159 billion from its renounceable non-underwritten rights issue based on the 90.6% subscription rate. The company had announced the rights monies will be used for opportunities in industrial, logistics and business park assets, for capital partnerships, and strengthening the balance sheet, where gearing would have fallen to 84.5% compared to the reported 97.6% as at March 31.
A couple of new initiatives were hinted at during the briefing. Frasers Hospitality is looking at a build-to-rent model in Australia. While the worst of the pandemic appears to be controlled, second and third waves have prevented a full-fledged resumption of tourism and travel, including corporate travel, globally and in Asia Pacific. As a result, hospitality trusts have to reinvent themselves. Among the locally listed entities, OUE Hospitality Trust is now part of OUE Commercial REIT. Ascott Residence Trust, which as its name suggests represents the lodging business, recently acquired purpose-built student accommodation.
The second initiative is for FPL to continue sourcing for landbank in China where its Chinese properties are substantially sold. “Definitely we are replenishing projects in China. It’s a key market and we are in the process of replenishing our landbank,” Panote says. FPL will continue working with partners such as Gemdale, and growing its own developments over time, he adds.
FPL’s most successful business is its industrial and logistics segment, and this was responsible for Frasers Property continues to pursue value for investors, says CEO the company reporting an 18% y-o-y rise in net profit to $275.8 million in 1HFY2021 for the period ended March 31.
The company announced that a portfolio of industrial properties in Australia and Europe has been transferred from properties held for sale to investment properties. Arising from this transfer, a gain on the change in use of $357.9 million, representing the difference between the fair value at the date of transfer and its previous carrying amount, was recognised. Excluding this gain on the change in use, profit before interest and tax and net profit would be $479 million (instead of $836.8 million) and $23 million, respectively.
