Fraser Centrepoint Limited ("FCL") announced its 1Q FY14/15 results on 12 February after market close. We dialled-in to the Analyst Briefing that was held on 13 February morning and these are the key takeaways.

An exceptional quarter for Australia residential revenue – For 1Q FY14/15, FCL realised a superior performance for Frasers Australand attributed to the significant completion of over 750 apartments in the quarter. The management highlighted there will be lumpiness in the revenue performance due to revenue recognition upon completion for Australia residential. Looking at the expected completion pipeline, the earnings for Frasers Australand should be lower for coming quarters.

Not in a rush for China expansion – At the moment, the management is adopting a cautious approach to expand the China portfolio due to the high degree of volatility in the restructuring market. With sizeable China landbank on hand, FCL will stay active while looking out for good valued opportunities.

Next upcoming project Northpark Residences – The launch of Northpark Residences will come after the relocation of the bus interchange to a temporary site. The move is targeted to be done in March, if not, in June. Amidst the current weak residential market, the management is confident that the project will be well-received with its well connectivity to public transport and unique local attributes.

Reduced gearing ratio; 55% of debt fixed – FCL has reduced its gearing ratio to 83.4% from 88.2% (restated) in the previous quarter. In view of rising interest rate environment, the percentage of fixed rate debt was improved to 55%. Consequently, the effective cost of debt increased marginally to 2.9%. The average weighted of debt maturity is of 3.3 years with only 3% due this year. FCL is in good position to manage the gearing with the visible earning cash flows. Moving forward, FCL may increase Australia borrowings to leverage on the weak AUD.

Recycling strategy – Possible divestments of hospitality assets to Fraser Hospitality Trust (FHT).

Investment Action

No stock rating or price target provided, as we do not have coverage on FCL.

Source: Phillip Securities Research - 16 Feb 2015