Frasers Property (formerly: Frasers Cpt (FCL))

[greengiraffe]

DBS Vickers maintain BUY:

Charging ahead
 3Q14 PATMI of S$109.2m in line with expectations
 Australand take-over ongoing; proceeds from listing of
FHT to improve balance sheet metrics
 Maintain BUY with TP S$2.08
Highlights
3Q14 results in line with expectations. Frasers Centrepoint
Limited (FCL) delivered a 3Q14 PATMI of S$109.2m, which was 59%
lower y-o-y. The main reason was the revaluation exercise
undertaken prior to the listing of FCL back in Jun’13. Stripping out
close to S$204m in revaluation gains in 3Q13, on a comparative
basis, core 3Q14 PATMI would have risen by 77% y-o-y to
S$120.0m. FCL’s balance sheet metrics remained stable with Net
Debt/Equity at 0.5x for the quarter.
Portfolio highlights. Revenues and operating profits jumped 41%
and 68% y-o-y to S$575.4m and S$147.6m respectively. The
improved operational performance was due to FCL’s share of
proceeds from the divestment of Changi City Point to FCT, revenue
recognition from the completion of Chengdu Logistics Hub Phase 2
in China and sale of completed units at One Central Park and Putney
Hill in Australia, and Riverside Quarter in the UK. The group’s
hospitality division also saw a 17% y-o-y jump in revenues to
S$53.5m, on the back of better occupancies achieved. Its other
business divisions – the investment properties and REITs remained
fairly stable, offering consistent cashflows to the group.
Our View
Unrecognised revenues from property development close to
S$2.56bn. YTD, the group has sold c.410 and 380 residential units
YTD in Singapore and in Australia respectively. Locked-in and
unrecognised revenues in these two countries are c.S$1.9bn and
S$0.6bn respectively, which is expected to be recognised
progressively in the coming years. The group has also sold a majority
of units launched in China, achieving close to over 1,500 in sales.
Proceeds from listing of FHT to further strengthen balance
sheet metrics. In line with its capital recycling strategy, FCL is
expected to reap close to S$654.7m in proceeds through the
divestment of six serviced residences following the successful listing
of Frasers Hospitality Trust (FHT). Assuming that the proceeds are
fully utilised towards repayment of debt, debt/equity is expected to
further improve to c.0.4x.
Australand completion. FCL has garnered close to 56.8% in
acceptance for its take-over offer for Australand and the offer was
declared unconditional on 7th Aug’14. The offer is expected to close
on 21st Aug’14 and the intention of the group is to eventually delist
Australand.
Recommendation
BUY, S$2.08 TP. Valuations remain attractive at 0.9x P/BkNAV.
Maintain BUY with a target price at S$2.08 based on 30% discount
to RNAV.

[greengiraffe]

Already lined up by a consortium of bankers... otherwise ALZ wouldn't have backed and recommended the deal...

Post conclusion of the deal will be interesting to see how Towkay deleveraged - next 3 -6 months and hopefully the market will be WOWed by his deal making capability...

ALZ deal is much smaller than F&N. Moreover it is asset rich in Australia when property sentiment remains positive in Residential and Ind Properties which will be conducive for FCL board to streamline and cheery pick ALZ assets that dovetails into that of FCL and strategic partners presently Down Under - http://www.sekisuihouse.com.au/home-builder-australia

GG

I wonder where is the capital to support the bid for Australand? Can't be all funded by debt as FCL is a public company, not a private holding company.

[newyorkcityboy]

Using S$780 mil of cash, FCL's net gearing is at 50%. Assuming fully debt funded, net gearing will rise to about 109%.
Much of the equity is also tightly held by the Thai principal. To improve both elements, will an equity raising exercise be undertaken?

[greengiraffe]

As I have reiterated many times over - we have to look beyond the obvious - increased gearing via the conclusion of the takeover.

The story in FCL lies in the deleveraging of the integrated and enlarged group over the next few months.

I think, the current negative sentiment towards property in Asia has over clouded the positive momentum in the Oceanic regions - Australia and NZ.

There are plenty of doubters on Towkay Charoen's ability. I have no doubts about his capability, his team that includes a former investment banker son-in-law and proven property veterans.

Most importantly, he controls 88% of F&N and FCL, if he is reckless enough to risk his money, I will be a willing co-passenger.

Vested
GG

[specuvestor]

Whether which companies within are cash cows is not a concern for him at all. He does not need excess cash in the holding level unless he tries to make another large acquisition on the holding level as cash is the worst performing asset for a business owner. Cash merely ensures liquidity and solvency, but does not generate adequate return. The merely cash flow required in the holding level are for interest payment and maybe a little debt repayment.

It is entirely unnecessary to extract more than enough cash from its operating companies as the regular dividend payment is sufficient.

FCL will continue to be the oversea property platform for the foreseen future among his business empire. He is not buying FCL to liquidate it. Any expectation of extracting more value from it will be duly surprised. FCL will behave like any other normal property company though dividend yield could be a little higher than Capitaland/CityDevelopment/Keppel Land, but nothing significantly different.

I wonder where is the capital to support the bid for Australand? Can't be all funded by debt as FCL is a public company, not a private holding company.

If we look at the LBO of FNN, anecdotally we can say that TCC is not exactly cash rish because 1) They needed funding/ cooperation from ThaiBev 2) the speed and massive capital restructuring of FNN to delever TCC

So TCC is using cashcows to leverage and pay back his credit cards. I don't think TCC has tons of excess cash sitting in banks.

FCL likely would have to raise capital and like I said, ThaiBev & probably FNN will providing large part of the funding directly and indirectly

[valuebuddies]

Right issue will probably out of the case, private placement could be possible which eventually increase the public floats. Even if FCL were to fund everything with debts, I don't really think that's a big issue as well. FCL might already have in its pipeline to spin off more assets for cash, we will see.

[freedom]

Give me one reason that TCC has to pay back his credit card. I don't see bankers are chasing TCC for debt repayment. Now is not a distress moment. If I am his banker, I will not ask for the money back as he is good for the credit and I get paid from the fee and the bank enjoin interest income from the loan.

No business owner just buy a business to sell it in pieces. That's what speculators or private equity does.

[greengiraffe]

           

FCL - Frasers Charoen Legend - Live Like U Mean It

Live Like U Mean It!

FCL was listed on 9 Jan 14. Since then FCL has wasted no time in building its track record as a listed company (even though it was a significant contributor to former parent F&N). Final dividends of 1.73 cents meant for FY9/13 was paid shortly after listing with a further 2.4 cents interim paid for FY9/14 in May 14.

FCL spinoff his 50% in Changi City Point (retail) into FCT in March while the much touted hospitality trust, FHT was established and floated in July 14 alongside the solid backing of parent TCC Assets. FHT joined FCT and FComm to complete FCL's comprehensive suite of REITs which will enable FCL to attain optimal efficiency of capital employed via recycling of matured assets when opportunity arises.

FCL's core development division continued its selective replenishment of landbank in the tough Singapore residential markets while its commercial property and hospitality units also added on new development assets (Cecil Street office development) and established assets (Sydney Wentworth Sofitel) during the last 7 months of listing.

Grab Life By The Tusks!

In early June, FCL stunned both the Singapore and Australian markets with a full cash offer for Australand (ALZ), the former "unwanted child" of the Capland Group. FCL effectively outbidded Stockland (an well established Australian integrated property company), who had been pursing ALZ for several months with the backing of the ALZ board on its fair and reasonable offer.

In ALZ, FCL is purchasing an established platform of investment properties (around 61% of total asset value comprising high quality industrial properties and offices in prime locations across Australian capital cities) and residential landbank (39%). As the Australian property market is a well regulated one with long gestation period, FCL's experience Down Under alongside with ALZ's proven track record, FCL will see immediate earnings accretion from the takeover.

Funding Concerns For ALZ Overplayed

In the light of the mammoth purchase of ALZ totalling A$2.6bn, market watchers are mainly pre-occupied with the immediate impact to FCL's gearing levels. Given that Towkay Charoen has came away with a much bigger prized catch in F&N, these pessimists appear to have under-estimated Towkay's ability in wheeling and dealing:

i) FCL continued to be backed by locked-in sales globally totalling S$2.56bn that will be progressively booked over the next 3 years;
ii) Strategic and established partners such as Sekisui House (http://www.sekisuihouse.com.au/) which is the 2nd largest in Japan that will be more than willing to be the future partner in FCL-ALZ projects
iii) Cherry picking and streamlining of ALZ's quality investment properties portfolio via outright sale or recycling via FCL's suite of REITs
iv) new share placement that will attract potentially strong institutional appetite (once the ALZ roadmap is clearer) that addresses FCL's tight free float (TCC and Thai Bev collectively owns 87.9% of FCL)
v) current gearing of 0.4x that can be moved towards a higher but optimal level
vi) in view of the above, highly unlikely chance of a out-right cash call by rights issue.

Give Mates More Than 100%

Towkay Charoen's deal making capability that started with F&N looks set to continue at FCL. FCL's proven track record of tailoring business strategies that based on local knowledge and industry conditions have been well demonstrated via its strong earnings since its listing as a separate property entity. Given the ongoing anti-speculative measures on Singapore property market, FCL's timely execution of risk-calculated expansion plans has put in a strong leadership position amongst listed property big-wigs on SGX.

Clear earnings visibility and dividend policy will certainly give mates more than 100%. Stay tuned for more signposts for value creation in the months ahead.

[greengiraffe]

Pacific Alliance Group linked to Australand bid

THE AUSTRALIAN AUGUST 12, 2014 4:46PM

Sarah Danckert

Property Reporter
Melbourne
THE $2.6 billion takeover of Australand by Singapore’s Frasers Centrepoint could face yet another hurdle, with speculation running hot that a fund linked to Hong Kong’s Pacific Alliance Group is building a stake in the company.

Sparking the chatter was a substantial shareholder notice for Australand released yesterday on the Australian stock exchange that was not issued by Frasers as expected, but rather Credit Suisse.

Credit Suisse’s holding has been linked to Pacific Alliance, which recently purchased some of Australand’s debt.

The notice showed the mystery investor’s stake rising to 8.95 per cent, from 7.91 per cent, in the space of a few days.

Rival suitor Stockland is also continuing to frustrate Frasers’ bid with the company yet to sell its 19.9 per cent stake into Frasers’ cash offer of $4.48 per share. Stockland again yesterday declined to comment on its intentions for its stake.

Frasers still holds a little over 60 per cent of Australand, with its stake barely budging in recent days.

Australand managing director Bob Johnston netted $4.25 million from divesting his holding in the company. He was appointed MD in 2007 and is highly regarded in the Australian property sector.

Frasers has outlined plans to delist Australand even if its holding does not reach the threshold for compulsory acquisition of 90 per cent.

However, sources said Frasers would have trouble delisting Australand without owning at least 75 per cent of the shares.

theres an interesting development going on in ALZ now.. credit suisse just reported an increase in their stakes for Australand

http://www.asx.com.au/asxpdf/20140812/pd...gx7x7r.pdf

from 7.91% to 8.95% within 2 days... Credit Suisse is not one of the financial advisors for FCL (SCB and DB are the appointed ones)..

seems like someone is still holding out for a higher offer.....should stockland put out a higher bid...is it possible for FCL to flip what they have now (60% of ALZ) for a quick profit? Not so familar with how these things go about in australia...... actually charoen did something similar in nature not too long ago on his flipping of APB (Asia Pacific Breweries) shares ....in that particular case he is successful in squeezing out a higher offer from Heineken

[specuvestor]

Give me one reason that TCC has to pay back his credit card. I don't see bankers are chasing TCC for debt repayment. Now is not a distress moment. If I am his banker, I will not ask for the money back as he is good for the credit and I get paid from the fee and the bank enjoin interest income from the loan.

No business owner just buy a business to sell it in pieces. That's what speculators or private equity does.

I don't know the bankers nor the covenant of this bridging loan. Never had I said it is a distressed situation. FNN was not distressed. The catalyst for the whole drama was when OCBC sold their stake to TCC. Bottomline is whether u believe it is LBO based on the anecdotal evidence.

My point is that it is most likely an LBO which I had explained. It is not that difficult to piece the puzzle together with so much activity, whereas thoughts we can only guess. (There is no lack of threads where people are guessing what the towkays are thinking)

For sure the towkay is a business owner but I think he is also 1) Opportunist 2) Empire builder. He struck deal and turn around sold APB remember? He effectively vetoed the FNN capital reduction for his own personal agenda. He "restructured" FNN soon after in breakneck speed, which I have commented in other threads that the only other player comparable was OUE. You are not new to the market, how many times have you seen towkays so willingly to share the spoils so quickly? Not sure how you define "selling off in pieces" but control is definitely important for him due to 2)

You have been watching ThaiBev closely and you would know how levered it was to go through the FNN deal. I wouldn't be surprised that TCC has similar capital structure as ThaiBev back then. Most of the time, if there is alternatives, a listed entity is used for M&A because of using their shares as currency. IIRC ThaiBev didn't issue shares for the FNN deal. Why would TCC need ThaiBev to lever up to do the deal with them? OTOH do u see "bankers chasing ThaiBev to return loans?" I think it is obvious that it is also in ThaiBev's interest to delever.

In the same vein why didn't TCC with Aussie interest, not do the ALZ deal directly if it is cash rich? We have thus yet to see how FCL is going to use its "currency"

Thereafter the FNN deal , we see rapidly fire of corp actions of 2 capital returns and 1 spin-off within the space of 8 months, which also directly reduced ThaiBev gearing. We have discussed that in the FNN thread. FNN is also no longer net cash. And if Towkay has so big plans for FCL, why bother to do the capital reduction in the 1st place?

Follow the cash flow and the gravy and you can see how the towkay is repositioning. That's why I think FNN and ThaiBev will continue to pay the bills of acquisition. And as of now I don't see the final act of FNN and FCL share swap unfeasible. In fact if FCL did do a cash call, my guess is the swap will happen soon AFTER the call is done. But that's probably too simplistic and I suspect the towkay might have more imagination to juggle the cash around.

If GG wants to dance with the empire-builder he needs to know what is the towkay's motivation. Most of the time their motivation is not enhancing shareholders' value. In the past 2 years it has only been so because we were anticipating how his actions will benefit OPMI. That's why I am waiting for the final act, just as discussed 1.5 years ago.