FCT revving all growth engines

Key takeaways from HK NDR. FCL met with 17 investors during our recent HK non-deal roadshow. Investors welcome a new property name with a decent market cap in excess of S$4bn within the listed space. Highlights of discussions centred around the group’s current business model including geographic and asset class allocations, potential for value unlocking from its hospitality assets, market outlook and future direction and strategies particularly after the presence of TCC Group as major shareholders, dividend payout ratio and key liquidity issues such as free float.

Putting growth building blocks in place.
Management reiterated that the group would continue to focus on building both its recurrent and development businesses to maintain a superior ROE metric. Singapore would continue to make up the bulk of GAV within this growing pie. Management is keen to selectively landbank in Singapore under current market conditions. In Australia, in addition to Perth and Sydney, it could look to explore Brisbane and Melbourne in the medium term. In China, it would remain in its existing footprint for economies of scale. The commercial property business should continue to expand with its 2 REIT platforms and clear growth pipeline from Changi City Point as well as 3
development assets. Within the hospitality business, where it currently owns c30% of the 8008 rooms under management, it plans to grow rooms under management to >14,400 by 2017, including potential inventory from TCC Group. Longer term, we believe by adopting an asset light strategy, would enable the group to improve ROE and ROA metrics of this business.

Maintain Buy, S$2.08 TP.
We retain our Buy call with a TP of S$2.08, premised on a 30% discount to RNAV. FCL is currently trading at 0.7x P/Bk NAV and at a steep discount to our RNAV estimates, which includes locked-in profits from residential projects as well as marking to market its commercial and hotel assets. With a strong balance sheet and strong income visibility, we believe the gap between share price and asset backing would narrow once the limited free float issue is addressed.