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Frasers Property's further round of UK fair value losses a 'negative surprise', says DBS

The Edge Singapore
The Edge Singapore  • 2 min read
Frasers Property's further round of UK fair value losses a 'negative surprise', says DBS
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Frasers Property's warning that it is booking further fair value losses in its upcoming 1HFY2024 is a "negative surprise", says DBS Group Research in its April 10 note. 

Even so, DBS expects the company to remain profitable in this current FY2024, with "dividends intact".

On April 9, Frasers Property TQ5 -

said it will report lower earnings for the six months ended March 2024 versus the year earlier, no thanks to a lower value of its commercial properties in the UK.

This impending round follows just after the company wrote down $446 million in FY2023 for its UK, other European and Australian assets, no thanks to cap rates estimated to have expanded by close to 50 basis points.

This coming round of fair value losses just months after the previous round will raise questions if the last reported fair value losses were truly reflected, says DBS.

DBS says that it had previously flagged that cap rates for UK commercial assets have expanded between 75bps -90bps, which means slightly more downside if 'marked-to-market'. 

See also: Analysts raise target prices for Centurion Corp following healthy 1QFY2024 results

Overall, DBS is not seeing "marked changes" to Frasers Property's NAV of $2.52 per share as at Sept 2023, given how UK commercial assets make up just around 1% of the company's total assets of $39.8 billion. 

Frasers Property closed at 85 cents on April 9, representing a steep discount of 70% off its NAV, close to its record lows.

DBS's current call on this counter is "buy", with a target price of $1.20.

 

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