Frasers Centrepoint (FCL) is eyeing Europe to expand its hospitality business, and new property launches in China and Australia in the coming months will buffer its earnings.
In Singapore, its malls are being transformed to compete against e-commerce, while the group remains committed to residential projects despite the stagnant market. This was all part of the multi-pronged growth plan that FCL highlighted yesterday when announcing its second-quarter results.
In the three months to March 31, net profit sank 13.8 per cent to $123.3 million, owing partly to fair-value losses at a Malaysian associate firm.
The top line was, however, robust. Revenue jumped 103.3 per cent year on year to $897.9 million, on the back of profit recognised from The Twin Fountains executive condominium and North Park Residences in Singapore.
The earnings growth from property development will be cyclical by nature and CEO Lim Ee Seng stressed that FCL will continue to build its recurring income assets in the commercial and hospitality segments. "If we want to be sustainable, we have to have a mix of development and recurring income. We always try to aim for 60 to 70 per cent (of total) in recurring income," he said at the results briefing yesterday. "Our hospitality unit is on track to manage 30,000 units by 2019. Look out for our hospitality business in the years to come."
AT A GLANCE
Revenue: $897.9 million (+103.3%)
Net profit: $123.3 million (-13.8%)
Interim dividend: 2.4 cents per share (unchanged)
Frasers Hospitality chief executive Choe Peng Sum said: "One of the key sectors we're looking at is Europe. The funding interest has dropped, property prices have moderated and yields are still supported."
These new assets can be "hothoused" within the group before being injected into the Frasers Hospitality Trust (FHT), Mr Choe noted.
FCL is a big property player straddling residential, commercial and hospitality segments in Singapore, Australia and China. It is also the sponsor of property trusts Frasers Centrepoint Trust, Frasers Commercial Trust and FHT, which last week announced the acquisition of a hotel in Dresden, Germany.
The group still has some $3.6 billion worth of unrecognised revenue from development projects in its three core markets. The delivery of these units will continue, with another 1,850 residential units set to be launched in Australia and over 800 units released in China in the next six months. Back in Singapore, FCL may move for a project launch within the next 10 months at a Siglap Road site it acquired as part of a consortium in January, Mr Lim said.
Meanwhile, Waterway Point was officially opened last month. The new mall in Punggol grew the list of FCL's directly owned malls to five, including The Centrepoint which is under renovation.
Mr Christopher Tang, FCL's chief executive for commercial and Greater China, said FCL malls are shifting towards providing "social experiences" through more food and beverage outlets and communal spaces, as the retail industry faces competition from e-commerce.
At the briefing, chief financial officer Chia Khong Shoong reiterated there is no certainty that its plan to list a new real estate investment trust will materialise.
The Reit, first reported earlier this week, will likely comprise of FCL's Australian logistics and industrial assets. Mr Chia added that the proceeds from the Reit, if successfully listed, could be used to reduce FCL's debt level.
Net asset value per share was $2.22 as at March 31, down from $2.25 as at Sept 30; earnings per share was 3.15 cents, down from 4.57 cents a year earlier.
An interim dividend of 2.4 cents was declared by the board, unchanged from a year ago and payable on June 9. FCL shares ended flat at $1.68 after the results announcement.