10 May 2016

Frasers Centrepoint Limited 2Q FY 15/16 Report Card

Frasers Centrepoint Limited posted their 2Q FY 15/16 earning report in summary below.
  • Revenue increased to $898 million, 103% higher than the corresponding quarter a year ago
  • PBIT increased to $226 million, 14% higher than the corresponding quarter a year ago
  • Profit before tax increased to $110 million, 11% higher than the corresponding quarter a year ago
  • Profit after tax is $123 million, 13.8% lower than the corresponding quarter a year ago
  • Declares interim dividend of 2.4 cents per share, same as corresponding quarter a year ago
The revenue and PBIT increased was due to profit recognition from the completion of Twin Fountains (an EC project, TOP in March 2016) and the progressive development profits from North Park Residences (a condo project, expected TOP in 2019). Profit after tax slips 13.8% was due to the FCL's share of fair value losses of joint ventures and associates.  

Property Development Key Highlights

FCL’s 80:20 joint venture with Keong Hong also recently launched its 628 units Parc Life EC project at Sembawang and also the 40:40:20 joint venture with Sekisui House and Keong Hong secured a tender for a 19,310 sqm private condominium land parcel along Siglap Road in January 2016 that can potentially yield around 800 to 900 apartment  units.

Commercial Property Key Highlights

Frasers Centrepoint  Malls officially opened Waterway Point (My visit to the mall) in Singapore in April 2016, building on a strong performance that has seen the mall receive over 6 million visitors since its soft opening in mid-January 2016. Meanwhile, the Group completed the sale of its 19% interest in Compass Point for around S$80 million in February 2016. The sale of One@Changi City for S$420 million by the Group’s 50% joint venture was also completed in March 2016. The sale of these assets were in line with the Group’s active capital recycling strategy.

REIT Key Highlights

Currently, FCL had 3 reits namely Frasers Centrepoint Trust, Frasers Commercial Trust and Frasers Hospitality Trust. Yesterday news release that they are looking to list their Australian logistics and industrial properties in the Singapore Exchange next month worth about S$800 to S$900 million. If this would to be materialise, it would be called the Frasers Logistics and Industrial Trust.

Looking ahead, development property transaction volumes will still remain low and are expected to
continue declining amid slowing economic growth and the ongoing effects of property cooling measures in Singapore. For the commercial front, with the increase in average household income and low employment, FCL will continue to support non-discretionary expenditure in the retail market. For office space, vacancy levels are expected to rise as major developments are completed. The outlook for the hospitality market in Singapore is soft due to the country’s uncertain macroeconomic
landscape and oncoming supply of 4,000 additional hotel rooms.

My thoughts on FCL is very optimistic. They are the 3rd largest property developers in Singapore after CDL and Capitaland. With a stable 8.6 cents of dividend per share yearly, we are looking at a 5% or more returns from this property giant. Not forgetting about the growth of this company, it is now trading at approximately 32% discount to its NAV of $2.22 per share. If you are looking for stable dividend income with potential growth, this company may fit your bill.

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