FOR the financial year ended Sep 30, 2021 (FY21), Frasers Property (FPL) posted S$833.1 million in attributable profit. This was a significant increase from the S$188.1 million reported in FY20. 

 

But FPL&rsquo s shareholders had little to cheer from the better financial performance.   The dividend per share for FY21 of 2 Singapore cents was up from 1.5 Singapore cents for FY20. But it is still much lower than the 8.6 Singapore cents for each of FY17 and FY18, and 6 Singapore cents for FY19.

 

FPL&rsquo s profit for FY21 was boosted by a one-time non-cash accounting gain from the change in use of a portfolio of industrial and logistics properties. The payout ratio excluding this one-time accounting gain is around 53 per cent.

 

Of course, FPL has continued to improve its financial performance. Last week, the group reported that attributable profit grew from S$22.5 million a year ago to S$158.2 million in H1 FY22. This comparison excludes the impact from the change in use of properties in FY21.

 

Nevertheless, FPL continues to trade below its net asset value (NAV). Based on its close on Tuesday (May 17) at S$1.08, FPL is valued at 43 per cent of its NAV per share of S$2.53 as at Mar 31, 2022. The stock is also 8 per cent below the price of S$1.18 paid by shareholders who subscribed for FPL&rsquo s rights issue in March 2021.

 

FPL&rsquo s share price may be affected by the group&rsquo s small free float.   Based on its latest annual report, Charoen Sirivadhanabhakdi and his spouse, Khunying Wanna Sirivadhanabhakdi, have a deemed interest of around 87 per cent of FPL, and the group&rsquo s free float is about 11 per cent.

 

Given that FPL trades at a huge discount to book value, perhaps the Sirivadhanabhakdi family will be tempted to take the asset-heavy group private.   Possibly, FPL will join the likes of Fragrance Group, GL, SingHaiyi Group and Top Global in being successfully taken private by entities linked to major shareholders.

 

The managers of Frasers Hospitality Trus : ACV -1.65%t (FHT), whose sponsor is FPL, are reviewing strategic options to enhance and unlock value for stapled security holders of FHT.   Perhaps FPL itself could step up efforts to unlock value for its shareholders.

 

Value unlocking

 

Could FPL learn from the restructuring exercise undertaken last year by CapitaLand?   This restructuring exercise involved taking private CapitaLand&rsquo s development business and creating the now-listed CapitaLand Investment : 9CI +1.58% (CLI), whose business comprises its investment management and real estate investment platforms. 

 

Shareholders gained from the exercise.   For every share held in CapitaLand, shareholders received one CLI share plus units in CapitaLand Integrated Commercial Trust and cash.   CLI trades at a premium to book value and CLI&rsquo s share price as at May 17, 2022 was above that of CapitaLand&rsquo s last traded price prior to announcing the restructuring.

 

As at Mar 31, 2022, FPL had total property assets of S$34.3 billion. Of this, 87 per cent was in recurring income asset classes. FPL could therefore take private its development business and create a listed entity that owns investment properties, lodging assets, stakes in real estate investment trusts and a stapled trust, as well as managers of trusts. 

 

In sum, FPL can create a listed entity that shares many characteristics of CLI.   Possibly, entities linked to the Sirivadhanabhakdi family that hold shares in FPL can then place out some of their shares in the new listed entity at book value to give the new listed entity a higher free float.

 

Distribution of FCT units

 

More immediately, FPL can consider distributing possibly half of its stake in Frasers Centrepoint Trust (FCT) to its shareholders.

 

FCT&rsquo s portfolio comprises mostly suburban malls in Singapore.   Listed in July 2006, FCT has seen its distribution per unit (DPU) grow at a compound annual growth rate of 4.5 per cent from 6.55 Singapore cents in FY07 to 12.085 Singapore cents in FY21.

 

For H1 FY22, FCT&rsquo s DPU rose 2.3 per cent year on year as revenue and net property income grew. Occupancy rose quarter on quarter, and the group saw positive rental reversion in H1 FY22.   With Singapore lifting many Covid-related restrictions earlier this year, FCT&rsquo s malls should thrive &mdash provided rising inflation does not eat into the trust&rsquo s profit margin or cause patrons to cut back sharply on shopping and dining.

 

As at Mar 31, 2022, FPL held a stake in FCT of 41.1 per cent. This is higher than its stakes in FHT and Frasers Logistics & Commercial Trust : BUOU 0% of 25.8 per cent and 21.5 per cent, respectively.

 

Units of FCT closed at S$2.31 on May 17, roughly on par with its book value. FPL&rsquo s shareholders may therefore be happy to hold units of FCT directly instead of via FPL. 

 

Should FPL distribute around half its stake in FCT, a shareholder of FPL can receive about 85-90 units of FCT for every 1,000 FPL shares held. That works out to nearly S$210 in value (of FCT) for S$1,080 worth of FPL shares.

 

Early this year, in response to a shareholder query on what will be done to improve share price and trading liquidity, FPL&rsquo s board had said: &ldquo As share price movements and trading liquidity are subject to market forces beyond our control, our focus remains on laying the foundation for a future-ready business&rdquo .

 

Indeed, share price movements are subject to many external forces. But FPL&rsquo s board and management can do more to unlock value of this deeply-discounted stock for the benefit of all shareholders, such as undertaking a corporate restructuring or a distribution in specie of units in FCT.

 

FRASERS Property : TQ5 -0.92% will continue to focus on growing its exposure to the industrial and logistics (I& L) sector as well as commercial and business park assets to capture new economy opportunities over the next 2 years.

 

Speaking at an earnings briefing on Thursday (May 12) morning, Frasers group chief executive Panote Sirivadhanabhakdi said: &ldquo We still see strong tailwinds in industrial and logistics.&rdquo Other areas in its portfolio that the group will continue to focus on are commercial office assets &ldquo in the right cities at the right location&rdquo as well as residential markets in which Frasers has a significant presence and an understanding of local demand and the underlying risks.

 

As at Apr 19, over S$500 million of an allocated S$700 million for the acquisition, investment and development of I& L and business park assets has been utilised. The S$700 million was set aside from the S$1.16 billion in gross proceeds raised from a rights issue last year.

 

Frasers posted a 42.6 per cent decline in profit to S$158.2 million for its second half ended Mar 31, 2022, from S$275.8 million a year ago.

 

In the previous corresponding period, the property company recorded a gain on the change in use of a portfolio of industrial properties, which have been transferred from properties held for sale to investment properties.

 

If the group excludes the impact of the gain in H1 2021, its net profit for H1 2021 would have been S$22.5 million, resulting in a net profit gain of 603.1 per cent for H1 2022 instead, Frasers said on Thursday.

 

In an update on its Singapore residential developments, Frasers said that its executive condominium, 496-unit Parc Greenwich at Fernvale Lane, has sold 97 per cent of its units, with completion targeted for H2 FY2024. Meanwhile, Riviere at Jiak Kim Street has sold nearly 48 per cent of its 455 units, and is slated for completion in H1 FY2023.

 

In response to a question on whether Frasers would be looking to build up its residential landbank in Singapore in the second half of this year, the group said it will &ldquo continue to adopt a prudent and disciplined approach to land acquisitions, assessing opportunities on a risk-reward basis&rdquo .

 

Its management also took questions on Bedok Point, after Frasers received written permission from the Urban Redevelopment Authority on Mar 3 to redevelop Bedok Point into a residential project with commercial units. Citing its good location, Frasers&rsquo management emphasised their confidence that the project would receive a good response upon launch. However, they also stressed that Frasers is not in a hurry to launch and plans to time the market well to maximise pricing.

 

In response to a question on the ongoing strategic review at Frasers Hospitality Trust, Sirivadhanabhakdi said: &ldquo We continue to look at the hospitality asset class as our strategic portfolio. We are able to drive good long-term value, especially in our serviced apartment area. The brand has great visibility, regionally and in markets such as Europe and the United Kingdom.&ldquo He went on to add that Frasers is strategic as a sponsor, and will continue to look at how it can create sustainable value for its investment as well as for the Reit (real estate investment trust). 

 

Meanwhile, in China, the group - together with partners - is looking into developing a residential project in the Shanghai city area, which could span about 700 to 1,000 units and could materialise in H2 2022. Plans, however, have not been confirmed at this stage. In March, Frasers had announced proposed plans to participate in joint ventures for investments in certain land plots in China.

 

For the period under review, the company noted it saw higher contributions from its hospitality business in the half-year period in H1 2022, amid increased domestic travel in the UK and higher contributions from residential settlements in Vietnam.

 

Earnings per share, after adjusting for fair value change and exceptional items, stood at 3.31 Singapore cents for the quarter, down 60.2 per cent from 8.32 cents a year ago.

 

Meanwhile, revenue for H1 rose 7.5 per cent to S$1.7 billion, from S$1.6 billion a year ago.

 

No dividend was declared for the half year, unchanged from a year ago. Its board said it &ldquo deems it prudent&rdquo to conserve the company&rsquo s financial resources amid the uncertainties surrounding the operating environment of its businesses and markets due to continued threats from Covid-19 variants, and rising inflation and interest rates.

 

Sirivadhanabhakdi said: &ldquo We are confident that Frasers Property is ready to take advantage of the gradual recovery and pursue growth opportunities arising from structural changes accelerated by the pandemic to deliver value.&rdquo

 

By business segments, profit before fair value change and exceptional items (PBIT) for its Singapore operations fell as the better performance from Frasers Centrepoint Trust (FCT) was offset by the absence of contributions from divested Anchorpoint and YewTee Point, as well as of non-recurring acquisition fees from the acquisition of AsiaRetail Fund.

 

PBIT in Australia also fell as it recorded a lower level of residential settlements due to timing of completion of development projects.

 

Meanwhile, its hospitality segment saw higher occupancies and room rates primarily driven by its UK properties, while its Thailand and Vietnam operations saw higher contributions from residential settlements in Vietnam.

 

With its fixed rate debt at 76.2 per cent as at Mar 31, 2022, the group does not expect the increase in interest rates to have a significant impact on the bottom line for FY2022.

 

FRASERS Property subsidiary Suzhou Sing Heng Le Enterprise Development has inked a strategic alliance agreement with its joint venture partner and its related entity to potentially invest in certain land plots in China.

 

Under the agreement, Suzhou Sing Heng Le will be funding 1.8 billion yuan (S$394.41 million) to cover the costs of the proposed investment, said the property developer in a bourse filing early on Monday (Mar 28).

 

Another wholly-owned subsidiary Singlong Property Development (Suzhou) will be lending one of the joint venture partners involved in the proposed development a bridging loan of 1.2 billion yuan (S$257.16 million), which can only be used to pay for the project.

 

If it does materialise, the companies will set up joint ventures that will own and develop the land plots.

 

Suzhou Sing Heng Le will also acquire indirect interest of up to 25 per cent in each of the joint ventures.

 

Otherwise, the company will be entitled to a full refund of the amount that has been paid, unless another arrangement of how these funds would be used have been agreed on by the parties involved.

 

As for the loan provided by Singlong, the total amount of 1.2 billion yuan will be provided up till July 1, 2022, with an interest rate of 8 per cent per annum.

 

Based on its projections, Frasers Property : TQ5 +0.93% estimates that the profit attributable to shareholders would decline by 2.1 per cent to S$759 million from S$775 million, after the company disburses the total investment amounting to about 3 billion yuan (S$651.57 million) through its two subsidiaries.

 

The earnings per share would also drop to 22.1 Singapore cents, from 22.6 cents.

 

The net tangible assets amounting to S$8.8 billion remain unchanged.

Mainboard-listed Frasers Property has appointed Soon Su Lin as the new chief executive officer (CEO) of its Singapore unit with effect from April 1 this year, it said in a bourse filing on Monday (Jan 24).

 

Ms Soon currently serves as the CEO of development at Frasers Property (Holdings) Thailand, a position she has held since 2017.

 

She will be relocating to Singapore to assume her new position at Frasers Property Singapore, where she will oversee operations of its retail-focused platform, Frasers Property Retail, as well as its commercial and residential businesses.

 

Prior to her appointment at Frasers Property (Holdings) Thailand, Ms Soon served as the CEO (Development) of TCC Assets, which saw her leading major development projects in Thailand that Frasers Property (Holdings) Thailand was involved in. This includes a joint venture with TCC Assets for the development of One Bangkok, an integrated mixed-use lifestyle district and the largest private sector property development under construction in Thailand.

 

Before joining the group, Ms Soon was the CEO of Orchard Turn Developments, which developed and operated Ion Orchard and The Orchard Residences in Singapore. She has over 30 years of experience in the real estate industry covering consultancy, investment sales, leasing and property development.

 

As head of Frasers Property Singapore, Ms Soon will report directly to Frasers Property' s group CEO, Mr Panote Sirivadhanabhakdi.

FRASERS Property, Frasers Property: TQ5 -2.54% through its wholly-owned subsidiary Suzhou Sing He Xiang Management Consultancy (SHX), on Thursday (Nov 25) entered into a framework agreement with an unnamed joint-venture (JV) partner and its related entity to participate in a potential investment in land.

 

In a bourse filing, the multinational property company said that if the deal materialises, SHX will acquire an indirect interest of up to 40 per cent in the JV. Frasers Property noted that none of the JV partners is an " interested person" of the company.

 

SHX will be providing funding of some 1.6 billion yuan (S$337 million) towards costs for the investment. It will also extend an interest-bearing bridging loan of some 1 billion yuan for a term of up to Apr 1, 2022, which will be utilised by the said JV partner towards payments in relation to the proposed investment. The loan bears an interest rate of 8 per cent per annum.

 

" The company is of the view that the provision of the proposed SHX investment amount towards the proposed investment would enable the group to form a strategic alliance with the JV partners and potentially jointly participate in other investment opportunities in the future," said Frasers Property.

 

Assuming the proposed investment amount had been provided for on Oct 1 last year, the earnings per share would have been lower at S$0.222 for the financial year ending Sep 30, 2021, instead of S$0.226 if there were no provisions made for the investment amount. Profit attributable to shareholders would have fallen from S$775.1 million to S$760.7 million.

 

If the proposed investments had been made on Sep 30, 2021, there would have been no difference to the pro forma financial impact on net tangible assets, said the company.

 

On Tuesday (Nov 23), Frasers Property announced that it has cancelled plans to acquire a 75 per cent stake in Vietnam property development company Phu An Dien Real Estate Joint Stock Company. It said the conditions precedent for the completion of the proposed acquisition have not been fulfilled by the long-stop date agreed by the parties.

MULTINATIONAL property company Frasers Property Frasers Property: TQ5 +1.74% announced that it has cancelled plans to acquire a majority stake in Vietnam property development company Phu An Dien Real Estate Joint Stock Company (PAD).

 

The agreement, announced on Jul 12, 2018, saw Frasers Property subsidiary, Frasers Property Investments (Vietnam) 2 (FPIV2), sign a conditional share purchase agreement with Tran Thai Lands Company to acquire 45 million shares worth 799 billion dong (S$47.3 million), or 75 per cent stake, in PAD.

 

In a late-night bourse filing on Tuesday (Nov 23), Frasers Property said the conditions precedent for the completion of the proposed acquisition have not been fulfilled by the long-stop date agreed by the parties. Both sides have mutually agreed to terminate the proposed acquisition.

 

Tran Thai has on the same date refunded and released from escrow, in full, all amounts paid by FPIV2 under the agreement in connection with the proposed acquisition, and an " agreed amount" towards reimbursement of expenses incurred.

 

Frasers Property said the termination of the agreement is not expected to have a material effect on the net tangible assets or earnings per share of the group for the current financial year.

WHILE the global real estate industry has generally " bottomed out" in terms of recovery from the Covid-19 pandemic, Frasers Property' s chief executive Panote Sirivadhanabhakdi stressed that capital and liquidity management will remain at the top of the group' s list of priorities as the sector will continue to face uncertainties in the form of " small ups and downs" as a result of the coronavirus pandemic. 

 

Some of these uncertainties include changes in behaviour of users and consumers, he said on a call with reporters and analysts on Friday (Nov 12) to discuss the company' s latest financial results. 

 

Frasers Property will have to anticipate these in advance in order to " unlock and enhance" the values of its assets, said Sirivadhanabhakdi. 

 

He also emphasised that the company has always adopted a " prudent approach" in terms of choosing to focus on deeper parts of the markets it operates in, where underlying demand is robust.

 

He added: " We will continue to focus on investment discipline and portfolio value enhancements, and will actively assess opportunities for enlarging our development base and unlocking value where feasible.

 

" Given the capital-intensive nature of our industry, we will continue to take proactive actions to optimise our capital structure so as to remain agile and well-positioned to maximise the potential of our businesses."

 

For the second half of the fiscal year ended September, Frasers Property swung back into the black with a net profit of S$528.4 million, versus a loss of S$74.8 million in the year-ago period. 

 

The reversal was due chiefly to stronger contributions from the group' s industrial and logistics segments - including gains from valuation uplifts and a one-off accounting gain from the reclassification of a portfolio of industrial properties in Australia and Europe from properties held for sale to investment properties. 

 

Revenue for H2 rose 50.2 per cent year on year to S$2.2 billion on the back of maiden contributions from a Vietnam development project, as well as higher contributions from development projects in Australia with a higher level of settlements.

 

As the world shifted to an " endemic" manner of living with the virus, Frasers Property also booked higher contributions from its hospitality properties as occupancy rates and revenue per available room rose amid the easing of virus-related restrictions. 

 

The board has proposed a first and final dividend of S$0.02 per share for the full year ended Sep 30, compared with S$0.015 in the same period the previous year.

 

For the full fiscal year, Frasers Property' s earnings rose to S$775.1 million from S$111.6 million in FY20. Revenue inched up to S$3.8 billion, from S$3.6 billion in the year before.

 

During FY21, however, the group recognised a writedown of about S$111.3 million to the net realisable value of properties held for sale. In comparison, the group recognised a similar writedown of only S$61.2 million in FY20. 

 

Frasers Property makes these allowances for foreseeable losses by applying its experience in estimating the net realisable values of completed units and properties under development.

 

With regard to such large writedowns surfacing in FY22, Sirivadhanabhakdi said he hopes not to have any major impairments again as the group, as well as the broader real estate sector, is " on the road to recovery" . 

 

Although the group' s return to profitability was spearheaded by its industrial and logistics segments in FY21, Sirivadhanabhakdi said the company is also looking to move towards more " blended" earnings across all its asset classes in the upcoming fiscal year amid a broad-based recovery from the pandemic. 

 

In particular, Frasers Property is eyeing opportunities from key emerging themes like new economy and e-commerce, and will continue to invest heavily in technology and innovation in order for the company to be ready to capitalise on stronger market fundamentals across different areas, including commercial and business park assets.

FRASERS Property Frasers Property: TQ5 0% has reversed into the black for the second half of the fiscal year.

 

The mainboard-listed property developer saw strong contributions from industrial and logistics, including gains from a valuation uplift and a one-time gain from the reclassification of a portfolio of industrial and logistics properties.

 

Net profit for the six months ended Sep 30 stood at S$528.4 million, reversing a net loss of S$74.8 million in the same period a year ago.

 

The results translate to earnings per share of S$0.016, against a loss per share of S$0.006.

 

Revenue rose 50.2 per cent on the year to S$2.2 billion, compared with S$1.46 billion posted the year before. The group saw maiden contributions from a Vietnam development project, as well as higher contributions from development projects in Australia with a higher level of settlements.

 

Frasers Property also recorded higher contributions from its hospitality properties as occupancy rates and revenue per available room started to improve as pandemic-related restrictions began to ease.

For the full year ended Sep 30, the group posted a net profit of S$775.1 million, nearly 7 times the profit recorded in the year-ago period. Revenue rose 1 per cent year on year to S$3.76 billion, from S$3.6 billion in the year prior.

 

The group reclassified a portfolio of industrial and logistics properties in Australia and Europe to investment properties. This resulted in a one-time accounting gain, as well as fair-value gains from the group' s industrial and logistics properties, helping to boost FY2021 attributable profit.

 

The board has proposed a first and final dividend of S$0.02 per share for the full year ended Sep 30, compared with S$0.015 in the same period the previous year.

Frasers Property has reported revenue of $3.8 billion for the year ended Sept 30, up 4.6% y-o-y.

However, earnings for the same period surged 343% to $833.1 million from $188.1 million last year, thanks mainly to revaluation gains on its industrial and logistics assets, which has become a bigger proportion of its total property portfolio.

 

Its hospitality business, meanwhile, remains affected by the pandemic, although it is seeing &ldquo green shoots,&rdquo says group CEO Panote Sirivadhanabhakdi.

He warns that prolonged uncertainties around global economic activity will likely persist.

The company will actively assess opportunities for enlarging its development base and unlocking value where feasible.

The company plans to pay a first and final dividend of two cents per share, up from 1.5 cents last year.