Frasers Property Limited (“FPL”) is tapping the retail bond market again with the issuance of a SGD 420m 5-year retail green bond issuance at a final price guidance (“FPG”) of 4.49%. FPL’s first encounter with the retail bond market was in 2015 where it issued a 7-year retail bond at 3.65%.
The new issue is a 5-year senior unsecured green bond and the expected maturity date will be on 16 September 2027. Up to SGD 300m in aggregate principal amount will be offered to retail investors while an offer of up to SGD 120m in aggregate principal amount will be offered to institutional or other investors. The use of proceeds from the new issuance will be used to finance or refinance eligible projects as per Frasers Property Treasury Pte Ltd’s Green Finance Framework. The use of proceeds can be used towards financing green commercial and residential buildings and green building portfolios such as REITs that receive at least 4-star rating from the latest GRESB reports.
Frasers Property Limited is a multinational real estate developer that is headquartered in Singapore. The company is listed on the SGX-ST Main Board and has total assets of approximately SGD 40.37b as at 31 March 2022.
For the first half financial results ending 31 March 2022 (“1H22”), revenues for FPL increased by 7.5% to SGD 1.68b. In the last financial year, FPL reclassified a portfolio of industrial and logistics properties in Australia and Europe from properties held for sale to investment properties. FPL had a gain in its financial statements the year prior due to this accounting change. On an adjusted basis, excluding the impact from the gain on change in use, profit before interest and taxation (“PBIT”) for 1H22 was SGD 526.1m as compared to SGD 478.9m in 1H21. Adjusted attributable profit also saw significant growth to SGD 158.2m from SGD 22.5m.
Refer to our latest credit update on FPL for more information on FPL’s key credit drivers – “Idea of the Week: Are perps from Frasers Property attractive in the real estate space?”
FPL’s credit profile have been improving year over year. Net gearing (net debt-to-equity) improved since FY20 following the divestment of FPL’s stake in in Asia Retail Fund and Frasers Commercial Trust, FPL rights issue and their divestment in Cross Street Exchange. Net gearing was 105% in FY20 and improved to 69.6% in 1H22.
FPL also had a high proportion of fixed-rate debt at 76.2% and average cost of debt is low at ~2.3% per annum. The high proportion of fixed-rate debt allows FPL to better manage its debt in a rising interest rate environment. Additionally, interest coverage for the company is also high at 3x. We find FPL’s capital management to be adequate as the management have taken steps to reduce gearing as well as keeping the proportion of fixed-rate debt high. We also expect FPL to refinance some of the expiring debt as it reaches their maturity.
There has been a lack of new supply of bonds offered to retail investors. The last issuance we saw was from Astrea in May 2022 and before this new issue it was the only corporate retail bond issuance in 2022. Due to the lack of alternative options in the retail corporate bond space, we think the FPL new green bond is attractive. We think this bond is suitable for stable income seekers.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a position in FPLSP 4.980% Perpetual Corp (SGD) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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