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What You Should Know About The Performance And Future Of Frasers Centrepoint Ltd’s Singapore Business

Frasers Centrepoint Ltd (SGX: TQ5) is a real estate company with interests in different geographies and different sectors of the real estate market.

Its focus is mainly on residential, commercial, retail, and industrial properties in Singapore and Australia, and hospitality assets in over 80 cities across Asia, Australia, Europe, and the MENA (Middle East and North Africa) region.

Appropriately, Frasers Centrepoint has three strategic business units (SBUs) and one business unit. They are, Singapore, Australia, Hospitality, and International, respectively.

In early November, Frasers Centrepoint released its full-year earnings for its fiscal year ended 30 September 2017 (FY17). I thought it would be useful to have a look at the business performance and outlook for each of the company’s SBUs. In here, the focus is on the Singapore SBU, which accounted for 21.3% and 37.4% of Frasers Cetnrepoint’s total revenue and profit before interest and taxes (PBIT), respectively, in FY17.

The business performance

The table below shows a business-breakdown of the Singapore SBU’s PBIT in FY17:


Source: Frasers Centrepoint FY17 full year earnings presentation

Frasers Centrepoint categorises its Singapore SBU into four parts, namely, Residential, Retail & Commercial, REITs, and Fee Income & Others.

In the Residential category, PBIT was lower due to the absence of lump sum profits from the TOP (temporary occupation permit) of the Twin Fountains executive condominium, and a joint venture project, QBay Residences, which were recorded in FY17.

The improvement in the Retail and Commercial category was mainly driven by a higher profit contribution from the asset enhancement initiatives (AEI) undertaken at two malls (The Centrepoint and Waterway Point), as well as a fair value gain enjoyed by Waterway Point.

The REITs category – made up of Frasers Centrepoint’s interests in two Singapore-listed REITs, namely, Frasers Centrepoint Trust (SGX: J69U) and Frasers Commercial Trust (SGX: ND8U) – saw a stable contribution from the aforementioned REITs.

Lastly, the improvement in the Fee Income & Others category was the result of ongoing property sales activities.

In all, the Singapore SBU’s PBIT suffered a 4.7% decline in FY17.

The outlook

We’ve seen that the Singapore SBU had delivered a lower PBIT in FY17. What’s in store for the business in FY18? Here are some important comments from Frasers Centrepoint on the Singapore SBU given in the latest earnings release:

“The Group will continue to grow its businesses and asset portfolio in a prudent manner across geographies and business segments. The Group is looking to grow its recurring income from a geographically-diversified earnings base. The Group will also focus on optimising capital productivity and strengthening its REIT platforms.

In Singapore, the Group will tender for sites to replenish its landbank.”

In other words, investors can expect Frasers Centrepoint to continue to focus on property development and the growth of its recurring income streams.

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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.