by winston » Mon Aug 11, 2014 4:30 pm
not vested
Business as usual
FCL SP / FRCT.SI | ADD - Maintained | S$1.77 /TP S$2.12
Mkt.Cap:US$4,075.00m | Avg.Daily Vol:US$0.76m | Free Float:12.00%
3Q and 9MFY14 core net profit was in line at 25% and 70% of our and consensus full-year estimates. During the quarter, FCL recorded strong growth on recognition of development earnings and was active on the capital-recycling front.
While much of the recent attention has been on its ALZ transaction, we note that FCL remains fundamentally strong with S$2.7bn of unrecognised development revenue, stable investment properties and a growing hospitality segment.
We maintain our Add rating and raise our target price to S$2.12 (30% discount to RNAV), largely due to higher target prices for FCT and FCOT and slightly lower FY14-16 EPS.
Results in line, strong on development earnings
FCL’s PBIT grew over 50% yoy, largely due to higher development earnings from
1) the sale of Changi City Point (CCP),
2) the completion of Chengdu Logistics Hub Phase 2, and
3) overseas developments in Australia and the UK.
Property sales was slower this quarter, partly contributed by a lack of launches. The upcoming launches in Australia should see healthy demand and sales.
Active capital recycling
Management continues to execute on its capital-recycling plans. We estimate that ~S$800m in capital was unlocked from the sale of 50%-owned CCP and the listing of Fraser Hospitality Trust (FHT).
With the capital deployed, FCL was also active on the acquisition front, purchasing Sofitel Sydney Wentworth for ~S$240m, additional stakes in FCT and FHT for ~S$300m and the Sembawang Drive EC site for S$240m.
Add on strong fundamentals and cheap valuations
Solid fundamentals. While much of the recent attention has been focused on the ALZ transaction, we note that FCL is fundamentally strong. It has locked in S$2.7bn of unrecognised revenue from its development segment, which should provide some earnings stability despite the weak residential markets in Singapore and China.
The commercial properties are stable and we anticipate a continual injection of pipeline assets into its REIT platforms. The hospitality segment is on track to manage more than 10,000 apartments by 2014.FCL is cheap, with valuations at a 42% discount to RNAV vs. peers’ 33%.
Previous "Frasers Centrepoint Ltd" reports...
8/8/14 Co.Flash Unconditional offer for ALZ (AD, S$1.72 /TP:2.09)
2/7/14 Co.Flash Offer for ALZ makes sense (AD, S$1.86 /TP:2.09)
5/6/14 Co.Flash A transformational proposal (AD, S$1.85 /TP:2.09)
Source: CIMB
It's all about "how much you made when you were right" & "how little you lost when you were wrong"