Frasers Centrepoint Trust - OCBC Investment 2016-04-25: Unyielding despite industry headwinds

FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust: Unyielding despite industry headwinds

Frasers Centrepoint Trust (FCT) reported its 2QFY16 results which came in within our expectations.
Gross revenue was down marginally by 0.8% YoY to S$47.1m, but NPI rose 0.4% to S$33.7m due to lower utility tariff rates and write-back of provision for property tax as a result of resolved property tax appeals and objections.
DPU increased 2.6% to 3.039 S cents although management had retained S$1.1m of taxable income available for distribution (or 0.116 S cents per unit) in 2QFY16 (2QFY15: nil).
For 1HFY16, FCT’s gross revenue slipped slightly by 0.5% to S$94.2m and this made up 48.6% of our FY16 forecast.
DPU of 5.909 S cents represented growth of 3.4% and formed 50.1% of our full-year forecast.

During the quarter, FCT delivered average positive rental reversions of 5.6%, with strong growth led by Changi City Point (+17.4%) and Causeway Point (+8.7%), but partially offset by Bedok Point (-26.9%).
Shopper traffic grew 11.4% YoY to 25.9m, while tenants’ sales rose 2.1% for the period from Dec 2015 to Feb 2016.
Portfolio occupancy declined from 94.5% as at end Dec 2015 to 92.0% due largely to the commencement of AEI at Northpoint (NP) in Mar. We note that this AEI and its potential near-term impact had previously been well communicated by FCT to the market.
Management provided further updates, highlighting that capex for the AEI is budgeted at S$60m and this would be funded by borrowings and internal resources. Although the NLA of NP is projected to be reduced by 4% due to reconfiguration of the mall, FCT expects average gross rental rates to be boosted by ~9% following the completion of the AEI.
From 3QFY16 to 4QFY16, occupancy at NP is forecasted to hover between 72% and 86% (2QFY16: 81.7%).

Given this in-line set of results, we retain our forecasts, and reiterate our BUY rating and S$2.25 fair value on FCT.
The stock currently offers FY16F distribution yield of 5.9%, based on our forecasts.

Wong Teck Ching Andy CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-04-25

OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 2.25 Same 2.25