Results Analysis: Barbell strategy playing out
- FY21 results supported by gains from industrial & logistics portfolio offset by lower recognition for development properties and provisions. Increased FY21 dividend.
- Key positives: i) FY21 sales volume doubled y-o-y, ii) industrial and logistics portfolio remains strong, iii) gearing reduced to normalized level, iv) raised FY21
- Key negatives: i) Australia commercial & retail occupancy at c.80%, ii) provisions made for Riviere project, iii) hospitality portfolio remains challenging but stabilising
- Maintain BUY; TP of S$1.70
|Attributable Profit (ex FV and EI)||90||310||-71%||11||680%||400||229||74%|
|PBIT (ex-gain on the change in use)||590||479||23%||455||30%||1,069||1,246||-14%|
|Attributable Profit (ex-gain on the change in use)||559||23||2330%||(46)||-1323%||582||188||209%|
|Gearing||73.7%||97.6%||-23.9 ppt||99.3%||-25.6 ppt||73.7%||99.3%||-25.6 ppt|
|Av cost of debt||2.3%||2.3%||0 ppt||2.3%||0 ppt||2.3%||2.3%||0 ppt|
|DSCR||4||4||0 x||3||1 x||4||3||1 x|
(+/-) FY21 results supported by gains from industrial and logistics portfolio offset by lower recognition of development properties and challenging hospitality market; gearing normalised to c.74%; raised FY21 dividend to 2 Scts vs 1.5 Scts
- FPL recorded FY21 net profit of S$833m vs S$188m in FY20 mainly due to c.s$1bn of fair value change and gain on disposal of investment properties (including S$356m gains from change in use of logistics assets to investment properties). Net profit (ex-FV and EI) was S$400m vs S$229m in FY20. Core net profit is estimated to be c.S$150m.
- Revenue grew 5% y-o-y but PBIT (ex-gain on change in use) -14% y-o-y mainly due to lower recognition / settlement of development properties (from all markets except Australia), project provision for Riviere project in Singapore and hospitality segment which were impacted by the pandemic.
- On segment basis, FY21 development properties PBIT fell 54% y-o-y. All countries saw decline with Singapore (-137% y-o-y) and China saw the largest decline (-77% y-o-y) due to timing on settlement of projects and provisions. FY21 recurring income (ex-gains) is estimated +15% y-o-y were mainly from industrial & logistics portfolio, commercial and fee income while retail and hospitality portfolio remained challenging.
- Gearing reduced further to 73.7% vs 97.6% in 3QFY21. Average cost of debt remained stable q-o-q at 2.3%.
- Raised full year divided to 2 Scts vs 1.5 Scts in FY20.
|– SG||94.9%||93.9%||1 ppt||88.4%||6.5 ppt|
|– AU||79.8%||78.9%||0.9 ppt||92.3%||-12.5 ppt|
|– SG||92.3%||93.5%||-1.2 ppt||92.8%||-0.5 ppt|
|– AU||79.2%||80.6%||-1.4 ppt||94.3%||-15.1 ppt|
|– TH (retail & office)||91.4%||90.4%||1 ppt||84.9%||6.5 ppt|
|– VN||86.6%||92.6%||-6 ppt|
|– AU||100.0%||100.0%||0 ppt||100.0%||0 ppt|
|– EU||98.0%||97.0%||1 ppt||99.0%||-1 ppt|
|– TH (warehouse)||89.8%||84.4%||5.4 ppt||83.5%||6.3 ppt|
|– TH (factory)||77.9%||76.5%||1.4 ppt||77.2%||0.7 ppt|
|– UK (business parks)||90.6%||87.9%||2.7 ppt||89.1%||1.5 ppt|
|– North Asia||56.50||55.90||1.1%||69.20||-18.4%|
|– APAC ex North Asia||98.20||101.10||-2.9%||121.30||-19.0%|
|– North Asia||47.1%||44.9%||2.2 ppt||52.9%||-5.8 ppt|
|– APAC ex North Asia||74.4%||76.0%||-1.6 ppt||72.1%||2.3 ppt|
|– Europe||38.7%||27.4%||11.3 ppt||49.7%||-11 ppt|
|Property sales (cumulative)||10,219||5,152||98.4%|
(+) FY21 sales volume doubled y-o-y, from all countries except China; Parc Greenwich EC was best-selling EC launch to-date
- FY21 showed sales volume doubled y-o-y to 10.2k units. Sales in all countries showed strong growth except China.
- Riviere (Singapore residential) sales inched up to 36.3% vs 27.9% in 3QFY21 and 12.5% in 4QFY20 and on track to complete in 1HFY23.
- Unrecognised sales stood stable at S$1.8b, Australia comprises the largest component at S$1.3b
- Parc Greenwich EC at Fernvale Lane launched on 11 Sep 21 and achieved 65% of sales during the launch weekend, best-selling EC launch to-date. Redevelopment of Bedok Point mall is on track.
- In Australia, FY21 settlements meet target at c.2.4k units while planned launch at 2.3k in FY21 surpassed target of 2k.
(+/-) Investment properties were generally stable with some pockets of improvement; logistics portfolio remained to be very resilient.
- Commercial and retail occupancies were relatively stable q-o-q except Australia commercial portfolio occupancy fell to slightly below 80% at 79.2% from 80.6% in 3QFY21
- Occupancies of commercial and retail portfolio were relatively stable ranging from 90% to 95% except Australia office and retail portfolio, as vacancies at Rhodes Corporate Park remains.
- Logistics portfolio remains stable. Australia maintained its full occupancy while Europe occupancy continue to creep up to 98% vs 97% in 3QFY21.
- UK business parks occupancy improved marginally to 90.6% vs 87.9% in 3QFY21 (+2.7ppt).
(+) Hospitality appears to have stabilised with Europe showing signs of improvement post reopening.
- Hospitality portfolio continues to be impacted by COVID-19 pandemic and travel restrictions but portfolio appears to have stabilised.
- Occupancy and RevPAR were relatively stable q-o-q except Europe which has seen some improvement post the reopening.
- Europe’s occupancy improved close to 40% (+11.3 ppt q-o-q) and RevPAR increased 66% to S$92.70.
- Expect to see progressive recovery as more travel borders open.
(+) AEIs / Development updates – continue to expand and invest into industrial and logistics portfolio
- Singapore – ongoing redevelopment of Bedok Point mall;
- In Australia – ongoing development of 354-unit built-to-rent (BTR) pilot project in Fortitude Valley, Brisbane with expected completion in 4QFY24
- Industrial & logistics – currently developing 11 projects with S$751m GDV with planned completion in FY22 and FY23 (Australia 91%, Netherlands 9%). Australia development properties comprises c.43% of GDV are development assets contracted for sale to third parties.
- Industrial & logistics continue to see strong structure growth and management will likely continue to invest in this asset class.
- Despite the strong residential sales pick-up, management remains cautious on the market and will likely expand in a measured manner.
- Management continue to embark on its asset recycling strategy to realise the value of its assets. Northpoint City (South Wing) continue to show resilient performance with occupancy at above 90%. The mall is currently undergoing its first lease renewal cycle.