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What You Should Know About The Performance And Future Of Frasers Centrepoint Ltd’s International 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 (BU). 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 International BU, which accounted for 17.8% and 25.2% of Frasers Centrepoint’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 International BU’s PBIT in FY17:


Source: Frasers Centrepoint FY17 full year earnings presentation

Frasers Centrepoint categorises its International BU into three operational parts, namely, China, Europe, and Thailand and Vietnam.

In the China category, PBIT grew mainly because of sales settlements of various development projects from both Frasers Centrepoint as well as its associates.

PBIT growth in the Europe category came from completions and settlements for projects in the UK (Vauxhall Sky Gardens and Camberwell Green) and the July 2017 acquisition of Geneba, a company with a portfolio of predominantly logistics and light industrial properties in Germany and the Netherlands.

Lastly, the Thailand and Vietnam category saw a significant increase in PBIT for FY17. This was due to a full year’s worth of contributions from its Thailand associate, Golden Land, and contributions from a newly-acquired associate TICON. In January 2017, Frasers Centrepoint acquired a 40.95% stake in TICON, a leading developer and owner of industrial properties in Thailand.

In all, the International BU enjoyed a significant 47.6% increase in PBIT from the completion of property development projects, and the acquisitions of other companies.

The outlook

We’ve seen that the International BU had done well in FY17. But what’s in store for the business in FY18? Here are some important comments from Frasers Centrepoint given in the earnings release (emphasis is mine):

“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….

The Group will continue to look at opportunities for sustainable growth in the international markets where it operates.

Based on what we have seen in the FY17 results and the outlook given, investors can expect Frasers Centrepoint to grow its International BU through more property development projects and acquisitions.

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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.