We keep our target price (30% discount to RNAV) but adjust our FY14-16 core EPS by +1%/-6% for changes to our launch schedule assumptions. The successful launch of a hospitality REIT could be a re-rating catalyst. Even without the REIT, FCL should be able to maintain its strong operational numbers, with the revitalisation of its property portfolio. Maintain Add.

Overall 1Q14 core net profit rose 75% yoy, driven by the strong overseas development sales. Development PBIT rose 121% yoy. Australia was the key driver for the quarter, with the completion of One Central Park (CP) and Park Lane Block 5A in Sydney. We expect the Australian sales to remain a key earnings driver in 2Q-3Q14. As for China, around 700 units were sold in 1Q14 (Suzhou Baitang project and Gemdale Mega City). In Singapore, development revenue declined by 18% yoy as most of FCL's inventory has already been sold. Total unbooked presales stood at a robust S$3bn at end-1Q14.

Investment property revenue rose 12% yoy due to the higher contribution from One@Changi City and rental rates. Its commercial portfolio is at full occupancy. The development of Waterway Point is on track to completion in 2015. The hospitality segment's revenue rose 18% yoy due to higher rates and occupancy.

Recent media reports suggest that FCL will launch a hospitality trust, which could raise c.S$600m. This would be a re-rating catalyst but it remains uncertain given the current market conditions. FCL's current valuation is at a depressed level of 0.6x FY14 P/BV (1Q14 book value of S$2.15). Including the potential sale of Changi City Point and One@Changi, we believe that FCL could recycle assets of around S$1bn in 2014. This would fund potential new acquisitions and/or initiatives to revitalise its commercial property portfolio. (Read Report)