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Strong operational profits at Frasers Centrepoint

But Q3 net profit slumps on lower fair value gains, higher exceptional loss

'Delivering value to shareholders and growing core earnings through the disciplined execution of our growth strategies remains our focus.'- FCL chief executive Lim Ee Seng

FRASERS Centrepoint Limited (FCL) is still looking to replenish its landbank in Singapore selectively, even as it develops its key overseas markets of Australia and China.

Having divested six hospitality assets to Frasers Hospitality Trust (FHT) which listed last month, the group will continue reviewing its portfolio to identify suitable assets for capital recycling, said a group spokesman.

FCL yesterday reported strong operational performance for the fiscal third quarter ended June 30, despite a 59.7 per cent slump in net profit to S$109.2 million.

The decline in net profit was due mainly to lower fair-value gains and higher exceptional loss than in the year-ago period; the exceptional loss of S$12.8 million came mainly from stamp duty arising from the acquisition of Sofitel Sydney Wentworth in Australia.

Excluding these items, FCL's net profit would have surged 77.2 per cent to S$120 million on the back of project completions in China, the sale of completed units in Australia and in the UK and gains from disposing its half-stake in Changi City Point to associate Frasers Centrepoint Trust (FCT).

FCL's revenue and profit before interest and tax (PBIT) jumped 41 per cent and 56 per cent year on year to S$575.4 million and S$160.3 million respectively, led by stronger contributions from development projects and hospitality operations.

Revenue from development projects jumped 50 per cent to S$472 million, thanks to improved performances in Singapore and overseas. The hospitality segment marked an 18 per cent rise in revenue to S$53.5 million on the back of higher occupancies registered at Fraser Suites Queens Gate in the UK, as well as Fraser Place Melbourne and Fraser Suites Perth in Australia.

For the first nine months of the fiscal year, FCL's revenue grew 58 per cent to S$1.7 billion, while net profit before fair-value change and exceptional items surged 62 per cent to S$346.2 million. After accounting for fair-value gains and exceptional items, net profit fell 38.6 per cent to S$300 million.

Commenting on the stronger operational results, FCL chief executive Lim Ee Seng said: "We undertook several key corporate actions that enabled the group to optimise capital productivity and strengthen our income base, as well as diversify our earnings across markets and increase recurring income."

This month, FCL's takeover offer for Australand turned unconditional after receiving sufficient valid acceptances for the A$4.48-a-share bid.

Upon completion of the deal, FCL will see a substantial increase in asset and profit contribution from outside Singapore and greater recurring income, the group said.

FCL derived gross proceeds of S$654.7 million from its injection of the six serviced residences into FHT, the S$1.67 billion portfolio of which includes six hotels from FCL's substantial shareholder, TCC Group. As part of its review, the group may divest suitable retail and office properties to FCT and Frasers Commercial Trust to optimise asset mix and yield, its spokesman said.

Despite the slowing residential market here, FCL reckons that land-banking opportunities could still surface as the bids for government sites moderate.

Last month, FCL acquired a 22,190 square metre executive condominium site in Sembawang Avenue through an 80-20 joint venture with Keong Hong Holdings. The plot is expected to yield around 620 residential units.

As at end-June, the group had unrecognised revenue of about S$1.9 billion and S$0.8 billion in Singapore and overseas respectively. Its Sengkang condo project RiverTrees Residences is 53 per cent sold; QBay Residences in Tampines is 99 per cent sold.

The FCL spokesman said: "Our strong pre-sales and recurring income from investment properties and Reits will continue to support our financial performance."