Frasers Property back in the black for H2; capital, liquidity management remain top priorities: CEO

WHILE the global real estate industry has generally "bottomed out" in terms of recovery from the Covid-19 pandemic, Frasers Property's chief executive Panote Sirivadhanabhakdi stressed that capital and liquidity management will remain at the top of the group's list of priorities as the sector will continue to face uncertainties in the form of "small ups and downs" as a result of the coronavirus pandemic.

Some of these uncertainties include changes in behaviour of users and consumers, he said on a call with reporters and analysts on Friday (Nov 12) to discuss the company's latest financial results.

Frasers Property will have to anticipate these in advance in order to "unlock and enhance" the values of its assets, said Sirivadhanabhakdi.

He also emphasised that the company has always adopted a "prudent approach" in terms of choosing to focus on deeper parts of the markets it operates in, where underlying demand is robust.

He added: "We will continue to focus on investment discipline and portfolio value enhancements, and will actively assess opportunities for enlarging our development base and unlocking value where feasible.

"Given the capital-intensive nature of our industry, we will continue to take proactive actions to optimise our capital structure so as to remain agile and well-positioned to maximise the potential of our businesses."

For the second half of the fiscal year ended September, Frasers Property swung back into the black with a net profit of S$528.4 million, versus a loss of S$74.8 million in the year-ago period.

The reversal was due chiefly to stronger contributions from the group's industrial and logistics segments - including gains from valuation uplifts and a one-off accounting gain from the reclassification of a portfolio of industrial properties in Australia and Europe from properties held for sale to investment properties.

Revenue for H2 rose 50.2 per cent year on year to S$2.2 billion on the back of maiden contributions from a Vietnam development project, as well as higher contributions from development projects in Australia with a higher level of settlements.

As the world shifted to an "endemic" manner of living with the virus, Frasers Property also booked higher contributions from its hospitality properties as occupancy rates and revenue per available room rose amid the easing of virus-related restrictions.

The board has proposed a first and final dividend of S$0.02 per share for the full year ended Sep 30, compared with S$0.015 in the same period the previous year.

For the full fiscal year, Frasers Property's earnings rose to S$775.1 million from S$111.6 million in FY20. Revenue inched up to S$3.8 billion, from S$3.6 billion in the year before.

During FY21, however, the group recognised a writedown of about S$111.3 million to the net realisable value of properties held for sale. In comparison, the group recognised a similar writedown of only S$61.2 million in FY20.

Frasers Property makes these allowances for foreseeable losses by applying its experience in estimating the net realisable values of completed units and properties under development.

With regard to such large writedowns surfacing in FY22, Sirivadhanabhakdi said he hopes not to have any major impairments again as the group, as well as the broader real estate sector, is "on the road to recovery".

Although the group's return to profitability was spearheaded by its industrial and logistics segments in FY21, Sirivadhanabhakdi said the company is also looking to move towards more "blended" earnings across all its asset classes in the upcoming fiscal year amid a broad-based recovery from the pandemic.

In particular, Frasers Property is eyeing opportunities from key emerging themes like new economy and e-commerce, and will continue to invest heavily in technology and innovation in order for the company to be ready to capitalise on stronger market fundamentals across different areas, including commercial and business park assets.