Frasers Property takes prudent stance in Singapore residential market

Singapore

FRASERS Property Limited has been taking a cautious approach to the Singapore residential market, given elevated land prices and a slow take- up rate from home buyers. But it continues to actively review opportunities, group chief executive officer Panote Sirivadhanabhakdi said at the group's earnings briefing on Monday.

"Singapore is still our home-ground, but we have to be resilient and not just invest for the sake of investing," he said in relation to the group's residential strategy for Singapore.

With the land price still high and the take-up rate slow, the group has been cautious about acquiring more residential land.

"But we are keeping up with the market and the team has been actively reviewing opportunities," he added, in response to a question during the briefing.

In FY19, Frasers took a writedown of about S$93.95 million to the net realisable value of properties held for sale across the group. Of this, Singapore accounted for S$39 million, which is likely due to its Rivière development at Jiak Kim Street. The provisions are non-cash in nature.

The provision "can allow for more marketing initiatives and/or better optionality in trading through Frasers' residential stocks", the group also highlighted.

As at end-October, Frasers' 455-unit Rivière had sold 46 of the 60 units launched to date. Two units were sold in October at a median price of S$2,818 per square foot.

Meanwhile, its Seaside Residences project, which is being developed together with partners, has sold 768 of its 841 units.

"Residential markets across Singapore, Australia, the UK - while we are cautiously optimistic - are facing headwinds of various kinds," said group chief financial officer Loo Choo Leong of the writedowns. "In addition to slowing GDP growth across these markets, there are uncertainties that may come. In order to build a more resilient residential development portfolio, we've taken the conservative approach of taking additional provisions to protect our residential businesses going forward."

Mr Loo said cutting prices would not be an appropriate route. "We have to trade through. It is a cyclical business, it is a long-term business. We will have to look at how we build enough gunpowder in order to ensure we will trade through relatively well, given the uncertainties that we see," he added.

Another developer that has seen a writedown this year is Bukit Sembawang Estates, which wrote down its land value for Makeway View by S$10 million in Q4FY18/19 as it announced an allowance for foreseeable losses relating to its project.

In Australia, Frasers is seeing signs that the residential market in the eastern states is bottoming out and has been building up its residential landbank, which included acquiring a residential site in Hardy's Road, Victoria in FY19.

Lumpiness in its development earnings caused Frasers' net profit for FY19 to fall 25.3 per cent to S$560.3 million, owing to lower contributions from development projects as well as lower fair value gains. This was partly offset by recurring income sources. Revenue for the year ended Sept 30 was 12.2 per cent lower at S$3.8 billion.

The company has proposed a final dividend of 3.6 Singapore cents, down from 6.2 cents in the previous corresponding period. Including the interim dividend of 2.4 cents, this works out to six cents per share for the full year, down from 8.6 cents for FY18.

Frasers shares closed at S$1.70 on Monday, down 12 cents or 6.6 per cent.