Frasers Centrepoint Trust 1QFY17 - Strong showing from Causeway Point
- 1QFY9/17 DPU of 2.89 Scts (+0.7% yoy) was in line with consensus and our expectations, forming 24.7% of our full-year forecast.
- Portfolio occupancy improved 1.9% pts qoq to 91.3%. FCT renewed 12.4% of the portfolio’s NLA in the quarter and achieved +6.9% rental reversion.
- Shopper traffic up 2.7% yoy to 27.1m.
- AEI at NP to peak in 2QFY17; to be completed by end-Sep 17.
- Maintain Add with unchanged DDM-target price S$2.01 on continued strong performance and acquisition upside.
1QFY17 results highlights
- The key positives from 1QFY17 results was average portfolio rental reversion of +6.9%, driven by Causeway Point (CP), and a 2.7% yoy increase in portfolio shopper traffic.
- Gross revenue was down 6.4% yoy due to lower contribution from Northpoint (NP) which is undergoing AEI works. However, lower property expenses (due to write-back of property tax) led to a smaller 5.7% yoy decline in NPI.
- Distribution to unitholders was up 1.1% yoy as 70% of manager’s fees were paid in units (vs. 20% in 1QFY16).
Portfolio occupancy of 91.3%; +6.9% rental reversion
- Portfolio occupancy improved 1.9% pts qoq to 91.3%, owing to higher occupancy from Changi City Point (CCP) with the opening of a new supermarket as well as completion of phase 1 of the AEI at NP. Excluding Yishun 10 Retail Podium, occupancy at NP would be 81.1% instead of 81.9%.
- During the quarter, FCT renewed 12.4% of the portfolio’s NLA and achieved +6.9% rental reversion. CP and CCP achieved +10.6% and +12.2% reversion, respectively, while Bedok Point (BP) experienced -10.1% reversion.
Shopper traffic up 2.7% yoy to 27.1m
- On a yoy basis, all malls, except for Anchorpoint, saw stable or improved shopper traffic.
- Portfolio tenant sales were 10.1% lower yoy due to AEI at NP. Meanwhile, CCP was affected due to a changeover in the anchor tenant space. Excluding NP and CCP, portfolio tenant sales were 2.4% softer yoy.
AEI at NP to peak in 2QFY17; to be completed by end-Sep 17
- Occupancy of NP is expected to trough at 57-58% from Feb-Apr 17 but increase progressively as AEI approaches completion at end-Sep 17. NP is on track to meet the targeted 9% uplift in rental rate from the AEI. 24.3% of the portfolio’s NLA is up for renewal in 9MFY17.
- CP accounts for c.37% of the lease expiries and should continue to drive positive rental reversion.
- Reversions at CCP could be erratic and expected to stabilise with the opening of the new MRT station. Leasing at BP could be challenging.
- We maintain Add with an unchanged target price on FCT.
- We think investor interest could pick up when the peak of NP’s AEI passes through in the next three months and occupancies and earnings recover.
- Meanwhile, FCT’s low gearing of 29.7% puts the trust in a strong position to explore inorganic growth. Its sponsor has two assets that could be injected when stabilised.
- Downside risk could come from a delay in the completion of the NP AEI.