■ FY15 results largely within expectations; high dividend yield of 5.2%.
■ Good earnings visibility from large S$3.1bn of unrecognized residential billings from Singapore, Australia and China.
■ Extensive pipeline of new investment property projects to boost rental income base.
■ New Thai strategic investment to broaden foray into Thailand.
■ Maintain Add with a RNAV-based target price of S$2.04.
FY15 results broadly in line, high dividend yield
FCL reported a good set of FY15 results, which came in broadly in line with expectations. FY15 revenue and PBIT grew 62% and 44% yoy, to S3.56bn and S$1.1bn respectively, with full-year contributions from FPA, higher residential income from China and Singapore as well as contributions from new hotels. Consequently, core net profit rose 16% yoy to S$544m. The group proposed a final DPS of 6.2Scts (total S8.6cts), translating to a yield of 5.2%.
Good development visibility with S$3.1bn of unrecognized sales
Development earnings visibility is strong with total S$3.1bn of unrecognized unbilled revenue, largely from Singapore (S$1.2bn), where North Park Residences is c.66% sold. In addition to 2,950 units released in FY15, FPA will launch a further 3,850 in FY16 to augments the S$1.5bn of unrecognized residential billings in Australia. Whilst landbanking in Spore remains challenging due to elevated land cost, FPA boosted its landbank by another 2,833 units in FY15 to reach a total development pipeline GDV of S$8.5bn.
Newbuilds to support rental income expansion
Recurrent income accounted for a larger 58% of PBIT, in line with FCL’s 60-70% target. Growth will continue to be underpinned by the strong rental income base from FPA’s C&I portfolio and the opening of the 95% pre-leased Waterway Point in Singapore in Jan 16 as well as completion of Frasers Tower, Northpoint City and AEI works at Centrepoint. The hospitality division should also see total units under management expanding from present 14,083 units to at least 22,783 keys by 2019.
Strategic investment in Golden Land to broaden Thailand foray
FCL announced a potential strategic investment in Thai-listed Golden Land Property Development. FCL will pay THB4,971m (S$196m) or THB7.29/share for a 29.5% share in the enlarged entity. Post restructuring, Golden is expected to have an estimated BV of THB12,738m. Golden focuses on landed and medium-density housing and mixed-use commercial and hospitality projects in the Bangkok CBD. Transaction proceeds will be used for new investment and development projects and to reduce gearing.
We maintain our Add rating on FCL with a slightly higher target price of S$2.04, based on a 30% discount to RNAV. Whilst gearing of 83.6% is higher than its peers, we believe potential capital management such as asset sales to its existing REITs would enable FCL to recycle capital going forward. The stock is currently trading at a steep 43% discount to RNAV. Other stock price catalyst could also emerge should the group increase its free float. (Read Report)
Source : CIMB Research