Starting the year on steady footing
? Robust balance sheet metrics with net debt to equity at 76.2%.
? Pick-up in locked-in residential pre-sales, strong L&I development pipeline.
? Reiterate Add rating with an unchanged TP of S$1.41.
1QFY9/22 business highlights
In its 1QFY9/22 business update, Frasers Property (FPL) shared that its net debt-to-equity ratio improved to 76.2% at end-1Q and interest cover stands at 3x. It has secured pre-sold residential revenue of S$2.2bn group-wide. With S$3.3bn of cash on its balance sheet at end-1Q, including S$400m rights issue proceeds to be deployed to grow its logistics and industrial (L&I) and business park portfolio, the group is well positioned to build on its operational resilience and expand its portfolio.
Higher unbilled residential revenue of S$2.2bn at end-1Q
Unbilled residential revenue in Singapore rose qoq to S$0.4bn on higher take-up rate of 44.4% at Riviere and Parc Greenwich (88.1% sold). Plans for the redevelopment of Bedok Point Mall are in progress, with the residential component launch scheduled for 2022F. In Australia, FPL settled 257 units in 1QFY22. Unbilled revenue was slightly higher qoq, steady at S$1.4bn as supportive economic conditions and rising ASPs for houses and apartments underpinned buying demand. In Thailand, there were two new project launches and 1,252 residential units were sold in 1Q. Plans are under way to launch Silom Edge by 4QFY22. This will likely extend the segment’s income visibility, which has S$0.1bn of unrecognised revenue at end-1Q.
Strong development pipeline within the L&I segment
The logistics & industrial (L&I) portfolio remained robust, with a high occupancy rate of 96.4-100% as at end-1QFY22, amid strong leasing activity. FPL is developing 14 new assets totaling 460k sqm in Australia and Europe, with a GDV of S$1bn, to be completed over FY22-23F. FPL has a total remaining L&I landbank of 2.7m sqm across Australia and Europe. Meanwhile, occupancy at the Australia commercial portfolio was lower at c.80% and FPL continues to adopt an active leasing effort to boost occupancy. Thailand’s industrial portfolio occupancy stood at c78.4-90.5%.
Still cautious on recovery within the hospitality segment
Within the hospitality segment, RevPAR for Asia Pacific and Europe saw a significant yoy rebound in 1Q even as North Asia RevPAR moderated yoy. FPL will continue to manage productivity, improve operational efficiency and execute recovery plans to position for future recovery. The group is also preparing for entry into Cambodia with three management contracts signed in 1Q while another 950 units are expected to become operational in 2022. Units under management increased 3.2% qoq to 16,700 units.
Reiterate Add rating
We tweak down our FY22-23F EPS estimates by 3.3-12.8% as we push out our hospitality segment recovery assumptions. Our RNAV/TP remain unchanged at S$2.57/S$1.41, assuming an unchanged 45% discount to RNAV. Active capital deployment is a potential upside catalyst. Downside risks: slower value unlocking activities due to the weaker macro outlook.