REITs − Singapore - 1Q17: Results Of AREIT (In Line), MIT (Above), FCT (In Line)
- FCT’s results came in within our expectations.
- Maintain HOLD on FCT with target price of S$2.15.
- Maintain sector OVERWEIGHT.
- Frasers Centrepoint Trust (FCT) has reported their quarterly results.
Frasers Centrepoint Trust (FCT SP/HOLD/S$2.11/Target: S$2.15)
- Results in line with expectations; maintain HOLD with an unchanged target price of S$2.15. Entry price: S$1.90.
- Our valuation is based on a two-stage dividend discount model (required rate of return: 6.4%, terminal growth rate: 1.2%).
- 2QFY17 DPU of 3.04 S cents was flat yoy.
- Gross revenue registered a 6% yoy decline, which was cushioned by a 16.4% decline in property expenses. This led a slower decline in 2QFY17 NPI (-0.9% yoy).
- The results were in line with our expectations, with 1HFY17 DPU coming in at 50.9% of full-year forecast.
Decline in tenant sales and shopper traffic.
- Shopper traffic was down 3.5% yoy (-7.7% qoq) in 2QFY17. Management attributed this to the closer time gap between Christmas and Chinese New Year this year. From Dec 16-Feb 17, tenant sales declined 12.1% yoy.
- Excluding the impact of AEI at Northpoint, tenant sales were still down 6.9 % yoy.
- Overall occupancy rate declined 4.1ppt qoq, reaching 87.2% in the latest quarter. The fall was mainly attributable to Northpoint (60.7% in the quarter), which saw its AEI commence in Mar 16.
Northpoint AEI update.
- Phase 1 of the project was completed in Jan 17, while Phase 2 is currently ongoing. Northpoint’s occupancy is expected to pick up from May 17 onwards till completion in Sep 17 (66% - 82%).
Gearing declined 30bp qoq to reach 29.4%.
- Borrowing costs saw an uptick of 10bp qoq, reaching 2.2% this quarter (1QFY17: 2.1%).