Frasers Property H1 profit down 42.6% to S$158.2m due to previous one-off gain 

FRASERS Property will continue to focus on growing its exposure to the industrial and logistics (I&L) sector as well as commercial and business park assets to capture new economy opportunities over the next 2 years.

Speaking at an earnings briefing on Thursday (May 12) morning, Frasers group chief executive Panote Sirivadhanabhakdi said: “We still see strong tailwinds in industrial and logistics.” Other areas in its portfolio that the group will continue to focus on are commercial office assets “in the right cities at the right location” as well as residential markets in which Frasers has a significant presence and an understanding of local demand and the underlying risks.

As at Apr 19, over S$500 million of an allocated S$700 million for the acquisition, investment and development of I&L and business park assets has been utilised. The S$700 million was set aside from the S$1.16 billion in gross proceeds raised from a rights issue last year.

Frasers posted a 42.6 per cent decline in profit to S$158.2 million for its first* half ended Mar 31, 2022, from S$275.8 million a year ago.

In the previous corresponding period, the property company recorded a gain on the change in use of a portfolio of industrial properties, which have been transferred from properties held for sale to investment properties.

If the group excludes the impact of the gain in H1 2021, its net profit for H1 2021 would have been S$22.5 million, resulting in a net profit gain of 603.1 per cent for H1 2022 instead, Frasers said on Thursday.

In an update on its Singapore residential developments, Frasers said that its executive condominium, 496-unit Parc Greenwich at Fernvale Lane, has sold 97 per cent of its units, with completion targeted for H2 FY2024. Meanwhile, Riviere at Jiak Kim Street has sold nearly 48 per cent of its 455 units, and is slated for completion in H1 FY2023.

In response to a question on whether Frasers would be looking to build up its residential landbank in Singapore in the second half of this year, the group said it will “continue to adopt a prudent and disciplined approach to land acquisitions, assessing opportunities on a risk-reward basis”.

Its management also took questions on Bedok Point, after Frasers received written permission from the Urban Redevelopment Authority on Mar 3 to redevelop Bedok Point into a residential project with commercial units. Citing its good location, Frasers’ management emphasised their confidence that the project would receive a good response upon launch. However, they also stressed that Frasers is not in a hurry to launch and plans to time the market well to maximise pricing.

In response to a question on the ongoing strategic review at Frasers Hospitality Trust, Sirivadhanabhakdi said: “We continue to look at the hospitality asset class as our strategic portfolio. We are able to drive good long-term value, especially in our serviced apartment area. The brand has great visibility, regionally and in markets such as Europe and the United Kingdom.“ He went on to add that Frasers is strategic as a sponsor, and will continue to look at how it can create sustainable value for its investment as well as for the Reit (real estate investment trust). 

Meanwhile, in China, the group - together with partners - is looking into developing a residential project in the Shanghai city area, which could span about 700 to 1,000 units and could materialise in H2 2022. Plans, however, have not been confirmed at this stage. In March, Frasers had announced proposed plans to participate in joint ventures for investments in certain land plots in China.

For the period under review, the company noted it saw higher contributions from its hospitality business in the half-year period in H1 2022, amid increased domestic travel in the UK and higher contributions from residential settlements in Vietnam.

Earnings per share, after adjusting for fair value change and exceptional items, stood at 3.31 Singapore cents for the quarter, down 60.2 per cent from 8.32 cents a year ago.

Meanwhile, revenue for H1 rose 7.5 per cent to S$1.7 billion, from S$1.6 billion a year ago.

No dividend was declared for the half year, unchanged from a year ago. Its board said it “deems it prudent” to conserve the company’s financial resources amid the uncertainties surrounding the operating environment of its businesses and markets due to continued threats from Covid-19 variants, and rising inflation and interest rates.

Sirivadhanabhakdi said: “We are confident that Frasers Property is ready to take advantage of the gradual recovery and pursue growth opportunities arising from structural changes accelerated by the pandemic to deliver value.”

By business segments, profit before fair value change and exceptional items (PBIT) for its Singapore operations fell as the better performance from Frasers Centrepoint Trust (FCT) was offset by the absence of contributions from divested Anchorpoint and YewTee Point, as well as of non-recurring acquisition fees from the acquisition of AsiaRetail Fund.

PBIT in Australia also fell as it recorded a lower level of residential settlements due to timing of completion of development projects.

Meanwhile, its hospitality segment saw higher occupancies and room rates primarily driven by its UK properties, while its Thailand and Vietnam operations saw higher contributions from residential settlements in Vietnam.

With its fixed rate debt at 76.2 per cent as at Mar 31, 2022, the group does not expect the increase in interest rates to have a significant impact on the bottom line for FY2022.

Shares of mainboard-listed Frasers closed at S$1.08 on Thursday, down S$0.01 or 0.92 per cent.

*Amendment note: The article has been amended to correctly state that Frasers Property posted net profit for its first half ended Mar 31, instead of second half.