Frasers Property shareholders raise questions on gearing and emerging market strategies 

FRASERS Property is placing a sharper focus on capital efficiency as the group seeks to reduce its gearing to a more comfortable range. 

Addressing several questions from shareholders at the annual general meeting (AGM) on Thursday (Jan 16), group chief executive officer Panote Sirivadhanabhakdi said that the group has been aware since Covid-19 of the need to reduce the total amount of debt it has.

However, he recognised that real estate was a “lumpy” industry and the group “never expected interest rates to rise significantly in a short period of time”. 

Frasers Property reported a full-year profit for the financial year ended Sep 30, 2024, of S$206.3 million, 19.2 per cent higher from S$173.1 million in the year-ago period. 

Net debt to equity stood at 83.4 per cent as at end-September, up 7.6 percentage points from 75.8 per cent in the year before. Net interest cover fell to 2.6 times in FY2024 from 3.1 times in FY2023. 

In response to queries filed by the Securities Investors Association (Singapore), Frasers Property said: “The sharpened focus on capital efficiency, coupled with a strong recurring income base, a structured cash flow funding plan and consistent efforts to evolve Frasers Property’s operating model to support the strategy of capital efficiency ensures the group is well-positioned to support our business operations, meet our financial commitments, and deliver long-term value to shareholders.” 

Emphasising that the group will not “grow for the sake of growing”, Sirivadhanabhakdi said that Frasers Property will continue pursuing risk-adjusted returns and divest assets “at the right time, at the right value”. 

While the group seeks to increase its development exposure, it is doing so through capital partnerships. 

For The Orie, the first private residential launch in Singapore of 2025, Frasers Property took a 25 per cent stake in partnership with City Developments Ltd and Sekisui House. 

The group said that the stake reflected its “strategic focus on partnerships that balance risk with returns while diversifying its residential portfolio”. 

It added: “Singapore is a key market for Frasers Property where we have established a strong track record in residential and mixed-use developments. We remain committed to this market and we continue to adopt strategies that balance returns with capital efficiency. 

“We will keep reviewing opportunities in both government land sales and private treaty deals, particularly those with positive site attributes. We are optimistic about the resilience of the Singapore residential market, underpinned by healthy fundamentals.”

During the AGM, Sirivadhanabhakdi said that as part of portfolio optimisation efforts, Frasers Property Australia has exited Western Australia. 

“High risk, high return”

When asked for more details by The Business Times, the group replied: “Frasers Property Australia has made a considered decision to focus on completing our current developments in Western Australia, while strategically shifting our investment towards large-scale, mixed-use opportunities in our core eastern seaboard markets. This approach allows us to leverage our greater capacity and scale for future growth.”

All existing Western Australia developments by the group will be completed and sold over the next two years. 

Shareholders also asked about the group’s business strategies in emerging markets such as Vietnam, Thailand and China.

Vietnam is a “high risk, high return” market where developers will have to be “very cognisant” of what they do, Sirivadhanabhakdi noted. 

The group has focused on residential developments for the right properties and its logistics and industrial portfolio has “always been viewed as an attractive and lucrative investment for us”, Sirivadhanabhakdi said.

“As Vietnam’s economy continues to thrive, with GDP growth of 7.1 per cent in 2024 fuelled by strong exports and robust foreign investment inflows, we remain committed to strategic acquisitions to capitalise on rapid urbanisation and infrastructure improvements,” the group added. 

In Thailand, the industrial and logistics sector continues to attract investment, benefiting from the China+1 strategy and manufacturing relocations amid US-China trade tensions, it said.

“We remain focused on leveraging our competitively positioned Grade A assets in Bangkok against other commercial properties to capture opportunities and higher margins,” it added.

Resilient core Tier-1 cities

While challenges remain in lower-tier cities in China, core Tier-1 cities where Frasers Property is invested, are expected to remain resilient due to broad-based demand and tighter supply. 

“The core Tier-1 cities are key beneficiaries of the recent relaxation in housing purchase restrictions, which have unlocked pent-up demand,” the group pointed out.

Residential sales in China increased by 15 per cent month on month in December 2024 and were up 17 per cent year on year.

Land auction activity in Shanghai has also picked up, with more developers submitting bids and premiums exceeding government reserve prices, the group said.