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The 4 Ways Frasers Centrepoint Ltd Makes Its Money

Frasers Centrepoint Ltd (SGX: TQ5) is a relatively new company in Singapore’s stock market. Its shares officially began trading only on January 2014 after it was spun-off from Fraser and Neave Limited (SGX: F99).

Frasers Centrepoint is an international real estate company that has an interest in many different aspects of the real estate industry. As such, I thought it’d be interesting to look at its various business activities to better understand how it really makes its money.

Here’s a breakdown of the company’s profit before interest and taxes (PBIT) for the nine months ended 30 June 2016:

frasers-centrepoint-trust-business-unit-table
Source: Frasers Centrepoint Trust’s factsheet

The Development Properties business unit mainly comprises the company’s development portfolio in Singapore and China. Some examples of Frasers Centrepoint’s recent development projects in Singapore include North Park Residences and RiverTrees Residences.

The Commercial Properties business unit includes (1) the interests that the company has in malls, offices, and business space properties, and (2) the interests in malls, offices, and business space properties held by real estate investment trusts that the company manages and has stakes in. These REITs include Frasers Commercial Trust (SGX: ND8U) and Frasers Centrepoint Trust (SGX: J69U).

This business unit is also where Frasers Centrepoint gets to earn recurring income through rent.

Next, we have the Hospitality business unit, which Frasers Hospitality Trust (SGX: ACV) is a part of. In this business unit, Frasers Centrepoint manages both its own properties as well as those from third-parties.  All told, the business unit has 113 serviced apartments and hotels (inclusive of 14 properties under Frasers Hospitality Trust) located in Africa, Asia, Australia, Europe, and the Middle East.

We now come to Frasers Property Australia, which is the Australian property segment of Frasers Centrepoint.

It comprises the business interests of Australia-based real estate company Australand (which was acquired by Frasers Centrepoint in 2014) and Frasers Centrepoint’s original development business in Australia. The activities of Frasers Property Australia include the development of residential land, housing and apartments, and the development and management of income-producing commercial, retail, and industrial properties.

In other words, this is a mini-Frasers Centrepoint that focuses mainly on Australia!

Foolish Conclusion

As we can see from all the above, there are many moving parts to Frasers Centrepoint’s business. For example, it has a relatively more volatile property development business and also a relatively more stable business of owning commercial and hospitality assets to collect rent.

By breaking down and understanding the different ways Frasers Centrepoint makes its money, investors can form a better investing view on the company.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.