CGS-CIMB Research analyst Lock Mun Yee has kept her “add” call on Frasers Property TQ5 with an unchanged target price of $1.41 after the group released its business update for the 1QFY2023 ended Dec 31, 2022.
In its business update, the group reported a “resilient” residential portfolio with healthy sales in Singapore and Australia. The group also noted its strong leasing demand for its industrial and logistics segment in Australia, Europe and Thailand.
“Meanwhile, its hospitality portfolio is well-positioned for recovery. Net debt-to-equity ratio stood at 70.2% and net interest cover of 3x as at end-1Q,” says Lock.
For the 1QFY2023, the group also reported a pre-sold revenue of $2.7 billion across Singapore, Australia, China and Thailand. The figure includes the group’s effective interest of joint operations (JOs), joint ventures (JVs), project development agreements and associates.
The “strong unbilled revenue” provides earnings visibility for the group, which is a plus in Lock’s book.
The group’s unbilled revenue for its residential segment stood at $1 billion as at end-December 2022 while its unbilled revenue in Australia came in at $1.2 billion, notes the analyst.
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Frasers Property’s hospitality recovery, particularly in the Asia Pacific (APAC) region, remains intact. The group’s hospitality segment saw its revenue per average room (RevPAR) surge by 107.1% in the 1QFY2023 led by strong improvements in its room rates.
Following the update, Lock has lowered her estimates for the FY2023 to FY2024 by 6.95% to 8.45%. She has, however, kept her revised net asset value (RNAV) estimate at $2.56. Her target price is still based on a 45% discount to RNAV.
“Active capital deployment is a potential re-rating catalyst,” she says. “Downside risks [are] slower value unlocking activities due to the weaker macro outlook,” she adds.
As at 4.12pm, shares in Frasers Property are trading flat at 89.5 cents.
