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10 Things To Know About Frasers Property (SGX: TQ5) Before You Invest

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Frasers Property Limited (formerly known as Frasers Centrepoint Limited) is a multinational integrated real estate conglomerate with assets located in Singapore, Australia, China, and Europe. Frasers Property is active in property development, management, REITs, and investments. As at 30 September 2018, Frasers Property has a total of S$32.4 billion in total assets.

In this article, I’ll revisit its fundamentals, provide an update on its latest results, and evaluate its valuation. Here are 10 things to know about Frasers Property before you invest.

1. Singapore: Profit before interest and tax (PBIT) grew 17.8% year-on-year to S$481.0 million in 2018.

This was due to an increase in development profits from key projects, namely: Park Life EC, North Park Residences, and Seaside Residences. This compensated for a slight reduction in distributions from Frasers Commercial Trust due to a drop in rental income from Alexandra Technopark and China Square Central in 2018. Frasers Centrepoint Trust continued to contribute stable distributions to Frasers Property’s Singapore segment.

Source: Frasers Property’s Q4 2016/Q4 2018 financial results presentation

2. Australia: PBIT grew 23.5% year-on-year to S$358.4 million in 2018.

This was mainly due to the completion of development projects, namely: Tailor’s Walk, Discovery Point, Fairwater, and other joint venture projects. This segment also saw improved financial results from its stake in Frasers Logistics Trust in 2018.

Source: Frasers Property’s Q4 2016/Q4 2018 financial results presentation

3. Hospitality: PBIT fell 15.2% year-on-year to S$130.8 million in 2018.

This was due to a soft performance from Frasers Hospitality Trust as a result of heightening competition in Sydney. The REIT also recorded lower demand at the Westin Kuala Lumpur, and ANA Crowne Plaza Kobe in 2018 — the latter due to Typhoon Jebi. Nevertheless, PBIT for this division has remained relatively stable over the last four years.

Source: Frasers Property’s Q4 2016/Q4 2018 financial results presentation

4. Europe and Rest of Asia: PBIT grew 33.5% year-on-year to S$366.0 million in 2018.

This was mainly due to a maiden contribution from its business park assets in the United Kingdom and the first full-year contributions from industrial and logistics properties in Germany and Holland. This segment also began recognising revenue from TICON, a Thai property developer, when it was reclassified from an associate to a subsidiary as a result of Frasers Property raising its stake from 41% in 2017 to 89.5% presently. These contributions more than offset a slight dip in development profits from China.

5. From 2014 to 2018, Frasers Property nearly doubled its group revenues as it increased from S$2.20 billion to S$4.31 billion.

This is due to the management’s effort in expanding Frasers Property revenue base from predominantly Singapore to across Asia-Pacific and Europe.

Source: Frasers Property annual reports

However, Frasers Property’s attributable profits before change in fair value and exceptional items only grew marginally from S$469.8 million in 2014 to S$507.2 million in 2018. Over this period, its attributable return on equity averaged 6.70%.

Source: Frasers Property annual reports

6. As at 30 September 2018, Frasers Property has a net debt of S$12.3 billion and a net debt-to-total assets ratio of 46.0%.

Frasers Property’s average cost of debt is 3.0%, and 77.6% of its net debt is based on fixed interest rates. Frasers Property has a current ratio of 1.52 with cash and bank deposits amounting to S$2.59 billion. Frasers Property has a healthy liquidity ratio to finance its development and investment activities in the near future.

7. Frasers Property increased its total property assets from S$16.9 billion in 2014 to S$28.0 billion in 2018.

Out of which, around 83% of its assets generate recurring income. The balance are development property assets which would contribute to Frasers Property’s future development profits. In 2018, Frasers Property derived 65% of its PBIT from recurring income assets, an improvement from 37% in 2013.

Type of Asset Value (S$ billions) Percentage of Total
Property Assets
Business Parks & Offices 7.2 26%
Logistics & Industrial 6.5 23%
Retail 4.8 17%
Hospitality 4.7 17%
Development 4.8 17%

Source: Frasers Property Q4 2018 financial results presentation

8. As at 30 September 2018, Frasers Property has unrecognised revenues of S$2.2 billion from its development projects.

Out of which, S$1.5 billion is derived from projects in Australia, S$0.4 billion from Singapore, and the remaining S$0.3 billion from China. Hence, Frasers Property is largely dependent on Frasers Property Australia for development profits where the bulk of its 20 development projects would be completed in 2019 and 2020.

9. P/B ratio: As at 30 September 2018, Frasers Property has net assets of S$2.53 a share. Based on its share price of S$1.71 (as at 11 March 2019), its current P/B Ratio is 0.68 which is near its five-year average of 0.695.

10. Dividend yield:

Frasers Property has a dividend policy of paying 75% of its net profits to shareholders. For the last five years, Frasers Property has paid out 8.60 cents in annual dividends per share. Based on its current share price and assuming it maintains its dividend, Frasers Property dividend yield is 5.03% which is slightly below its 5-year of 5.16%.

The Fifth Perspective

Over the last five years, Frasers Property has successfully transformed itself from a Singapore-centric company to one that now has a presence across Asia-Pacific and Europe. Frasers Property’s share of PBIT from Singapore fell from 87% in 2013 to just 31% in 2018. This is important to its long-term growth as the Singapore real estate market provides limited growth opportunities.

Moving on, Frasers Property has built itself a solid foundation where it will continue to earn continuous streams of recurring revenue from its portfolio of property assets. This stability allows the to be more resilient and ride through a slowdown in the property cycle.

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