Despite its hospitality segment continuing to face headwinds from the Covid-19 pandemic, CGS-CIMB analyst Lock Mun Yee has maintained her “add” rating on Frasers Property Limited (FPL) with an unchanged target price of $1.70. This was on the back of residential settlements staying on track for 1QFY2021 ending September and robust industrial and logistics occupancy. 

“The hospitality segment continued to face challenges with revenue per available room down 24.9-68.7% y-o-y across its geographic footprint,” writes Lock in a Feb 8 broker’s report. This is in part due to coronavirus mutations resulting in a global spike in cases, slowing down the recovery timeline of the travel and tourism industry. 

For now, FPL is actively planning regional and global campaigns to prepare for new travel corridors. It is also targeting domestic tourism, with new properties opening in China, Vietnam and malaysia. Management is also reviewing cost management measures. 

Still, the counter has remained resilient financially, reporting that its net-equity ratio had fallen from 105% at the end of 4QFY2020 to 99.3% at the end of 1QFY2021. This followed the sale of its stake in Asia Retail Fund to Frasers Centrepoint Trust. FPL’s debt maturity profile is well-spread, with just 23% of total debt expiring in less than a year. 

Lock likes FPL’s healthy occupancy rate of 94.4%. Asset enhancement initiatives for Alexandra Point beginning in February are also seen to be a positive for long-term earnings by improving occupant experience. FPL’s focus on non-discretionary retail is anchored by large supermarket tenants, especially in Australia. 

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SEE:Frasers Property to combine group's industrial and logistics operations in Australia and Europe with FLT in FY2020

In particular, FPL’s industrial and logistics portfolio remained robust with high occupancy at the end of 1QFY2021. Its Thai portfolio remained stable at around 83% due to growing demand for industrial properties in the kingdom due to supply chain reconfiguration stemming from US-China trade tensions and Covid-19 disruption. 

Meanwhile, FPL has leased 5% of its total portfolio industrial and logistic leasable area in 1QFY2021, in Europe and Australia. It is currently developing 11 new assets over the next two years, with the total area being 304,923 square metres. 

The counter currently has $1.7 billion worth of unbilled residential sales across Australia, Singapore, China and Thailand as at end 1QFY2021. Residential settlements, notes Lock, are seen to be on track for the quarter. 

“In Singapore, it plans to launch the Fernvale Lane executive condominium in 4QFY2021 while planning is in progress for the proposed redevelopment of Bedok Point into a residential project with commercial ground floor units,” reports Lock. 

In Australia, FPL has settled 539 units, or around 27% of its FY2021 target and sold 699 in 1Q amid rising market prices with $1.3 billion on unbilled revenue by the end of the quarter. In China it has $0.2bn of unbilled pre-sales at end-1QFY2021. 

“In Thailand it settled 772 units and sold 1,636 units in 1Q, bringing unrecognised revenue to $71m, and it plans to launch 21 residential projects with a combined gross development value of $1.3bn over the next 12 months,” Lock reports. 

FPL is expected to record a relatively attractive core P/E of 10.23 in September 2021 and a dividend yield of 3.31%. While active capital deployment is a potential re-rating catalyst, slower value unlocking activities due to weaker macro outlook could be a downside. 

As of 12pm, FPL is trading flat at $1.20 with a P/E of 31.83 times. Dividend yield is now 1.25%, according to CGS-CIMB’s estimates.