- Balance sheet metrics held steady qoq in 3Q/9MFY22.
- Recovery in all segments, except for its Australian commercial portfolio.
- Reiterate Add rating with an unchanged TP of S$1.41.
9MFY9/22 business update highlights
In its 9M business update, FPL reported that its residential portfolio continued to enjoy healthy sales across its geographic footprint, while there was strong leasing demand for its industrial & logistics (I&L) segment in Australia, Europe and Thailand. Meanwhile, its hospitality portfolio benefited from improved resilience and operational efficiency on the back of a recovery in global travel. Net debt to equity ratio stood at 70.5% and net interest cover of 3x as at end-3Q.
Unbilled revenue of S$2.3bn provides earnings visibility
Unbilled residential revenue in Singapore rose qoq to S$0.7bn on higher take-up rate of 65.1% at Riviere and Parc Greenwich (100% sold). With its ongoing projects largely presold, we believe plans for the launch of Sky Eden @ Bedok are underway. In Australia, FPL sold 1,296 units and settled 703 units in 9MFY22. Unbilled revenue in Australia remained stable at S$1.3bn as at end-Jun. In Thailand, there were eight new projects launched in 9MFY22 and 3,404 units were sold during this period. Management remains focused on capturing demand for the single detached housing category. As at Sep, Thailand and UK have a total of S$0.3bn unrecognised revenue.
High occupancy and robust leasing demand for I&L segment
The industrial & logistics (I&L) portfolio remained robust, with a high occupancy rate of 97.8-100% as at 9MFY22, amid strong leasing activity. FPL is developing 16 new assets totalling 476k sq m in Australia and Europe, with a gross development value (GDV) of S$1.3bn, to be completed over FY22-23F. FPL has total remaining L&I landbank of 2.8m sq m across Australia and Europe. Meanwhile, occupancy at its Australia commercial portfolio remains challenging at 68.5%, and FPL remains focused on active leasing efforts to boost occupancy. Thailand’s end-1H industrial portfolio occupancy stood at c.79.6- 87.3%.
Hospitality recovery remains intact
The hospitality portfolio, particularly in Asia Pacific (ex-North Asia) and Europe enjoyed a 28.4-209.2% surge in RevPAR, led by a recovery in global travel and pick-up in long-stay demand (in Singapore), partly offset by weaker portfolio performance in North Asia. While some headwinds from inflationary pressures are likely to be felt, FPL will continue to manage productivity, improve operational efficiency and execute recovery plans to position for future recovery. It is scheduled to open one more property in North Asia by end-2022F and has signed three new properties in Cambodia.
Reiterate an Add rating
We leave our FY22-24F estimates unchanged, and maintain our RNAV at S$2.56 and TP at S$1.41 (still based on a 45% discount to RNAV). Active capital deployment is a potential re-rating catalyst. Downside risks: slower value unlocking activities due to the weaker macro outlook.