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Frasers Property notes ‘volatile’ business environment despite signs of inflationary pressure easing in 1QFY2024 update

Felicia Tan
Felicia Tan • 5 min read
Frasers Property notes ‘volatile’ business environment despite signs of inflationary pressure easing in 1QFY2024 update
Frasers Tower. Photo: Frasers Property
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Frasers Property (FPL) stressed that it will develop and operate its business where it has “local platform capabilities” in its business update for the 1QFY2024 ended Dec 31, 2023.

According to its Feb 2 announcement, the group’s priorities are to achieve better risk-adjusted returns, visibility of earnings and cash flows.

The group announced its key leadership changes on Jan 15, reflecting a simpler organisational structure. According to the group, the changes were to “build a more resilient and future-ready organisation” in alignment with its overall strategy.

However, in its update, the group noted several points including a volatile business environment despite signs of inflationary pressure easing, structural shifts and evolving consumer preferences in the real estate sector, as well as a higher interest rate environment and volatile foreign currency movements. All of these points have been mitigated by the group’s portfolio management strategy, disciplined capital management and “enhancing [its] capabilities” among other things.

During the 1QFY2024, the group saw “steady progress” for its residential development portfolio with pre-sold revenue of $2.4 billion across Singapore, Australia, Thailand and China as at Dec 31, 2023.

Its industrial and logistics (I&L) portfolio also saw strong leasing activity and development pipeline growth. In Singapore and Thailand in particular, FPL’s portfolios remained resilient. Its Australian portfolio stood stable while the group says it is conducting “ongoing asset repositionings” to enhance the competitiveness of its commercial portfolios in Australia and the UK.

See also: Cordlife posts net loss of $11.57 mil for 1QFY2024 due to refund fulfilment

As at Dec 31, 2023, FPL’s net gearing ratio increased by 2.2 percentage points q-o-q to 78.0% mainly due to capital expenditure (capex). This was partly offset by the divestment of its stake in Changi City Point.

Singapore residential portfolio

In Singapore, FPL reported $0.9 billion in unrecognised revenue with 640 contracts on hand.

See also: Changi Airport Group reports FY2024 earnings of $431 mil, 13.1 times higher y-o-y

FPL’s average occupancy rate for its retail portfolio in Singapore inched up by 0.1 percentage points q-o-q to 98.7% as at Dec 31, 2023, while the average occupancy rate for its commercial portfolio dipped by 0.5 percentage points as at the same period.

About 18.9% of leases are due to expire over the remainder of the financial year for FPL’s Singapore retail portfolio while 15.7% of the leases are due to expire for FPL’s commercial portfolio in Singapore.

Australia residential and commercial portfolio

In Australia, FPL reported $0.8 billion in unrecognised revenue with 1,787 contracts on hand. The country saw strong residential sales in the 1QFY2024 on the back of robust demand.

As at Dec 31, 2023, FPL’s office portfolio occupancy rate in Australia fell by 7.4 percentage points    q-o-q to 47.3% while its weighted average lease expiry (WALE) fell to 1.9 years from 2.0 years in the three months before.

Its Australia retail portfolio occupancy inched by 0.1 percentage point q-o-q to 96.1% while its WALE fell to 6.2 years from 6.4 years in the three months before.

In I&L, FPL’s Australian portfolio reported 100% occupancy with a WALE of 5.3 years.

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Thailand residential and commercial portfolio

In Thailand, FPL reported $0.03 billion in recognised revenue with 162 contracts on hand. Its occupancy rate for its office and retail portfolio fell by 0.8 percentage points q-o-q to 92.0% while WALE stood at 1.8 years, up from 1.7 years as at the three months before.

FPL’s Thailand warehouse portfolio under I&L saw its average occupancy rate increase by 0.2 percentage points q-o-q to 88.3% with a WALE of 3.4 years, down from 3.5 years in the three months before. The country’s factory portfolio reported a 2.0 percentage point q-o-q increase to 85.6% while WALE stood stable q-o-q at 2.1 years.

European portfolio reported an occupancy of 96.7% as at Dec 31, 2023, 0.8 percentage points down q-o-q. Its WALE stood at 5.2 years, down from 5.3 years in the three months before.

Vietnam residential and commercial portfolio

The group’s Vietnam industrial portfolio saw full occupancy as at Dec 31, 2023 while its WALE fell to 8.7 years from 9.7 years in the three months before. Vietnam’s commercial portfolio saw a stable occupancy rate of 89.9% as at Dec 31, 2023, with an unchanged WALE q-o-q of 1.6 years.

China’s residential portfolio

In Shanghai, FPL reported $0.7 billion in unrecognised revenue with 4,128 contracts on hand.

The group is buoyant on the country’s prospects after the latter achieved the major economic targets it had set for 2023.

UK’s commercial portfolio

In the UK, the group noted “stable portfolio metrics” despite headwinds. FPL’s business park in the country fell by 0.5 percentage points q-o-q to 87.4% while WALE rose to 6.4 years from 5.8 years in the three months before.

Hospitality

In hospitality, FPL’s average occupancy rate in Asia Pacific (APAC) fell by 2.6 percentage points y-o-y to 76.3% due to the weaker performance from its Singapore properties after the end of government quarantine contracts. An increased number of rooms in Singapore during the 1QFY2024 also hurt FPL’s hospitality portfolio metrics.

Average daily room rates (ADR) in APAC fell by 4.7% y-o-y to $221.80. Revenue per available room (RevPAR) fell by 7.9% y-o-y to $169.10.

In Thailand in particular, FPL’s hospitality portfolio saw its occupancy fall by 5.6 percentage points q-o-q to 66.2%. ADR rose by 5.1% q-o-q and 10.2% y-o-y to $154.30. RevPAR, on the other hand, fell by 2.84% q-o-q and 0.97% y-o-y to $102.50.

In EMEA or Europe, the Middle East and Africa, FPL’s average occupancy rate rose by 0.4 percentage points y-o-y to 78.8%. ADR rose by 2.1% y-o-y to $235.80 while RevPAR was up by 2.7% y-o-y to $185.90. The higher occupancy and RevPAR were attributed to stronger demand while the higher ADR was due to price-adjustement strategies.

As at Dec 31, 2023, cash and deposits stood at $2.5 billion.

Shares in FPL closed 1 cent higher or 1.16% up at 87.5 cents on Feb 2.

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