Healthy and stable
- FCT’s 3Q/9MFY15 DPUs were in line, at 26% and 74% of our full-year forecasts.
- We are encouraged by the improvement in its tenant sales (+2.2% yoy) and shopper traffic (+3.6% yoy).
- While occupancy dipped slightly due to Bedok Point, rental reversion for 9MFY15 remained healthy at 6.2%.
- With only 7.1% of its portfolio leases set to expire in the remainder of the year, we expect FCT to remain stable operationally.
- We maintain our Add rating, with marginally lower DDM-based target price S$2.23 (prev S$2.24) and DPU forecasts as we fine-tune our rental estimates.
- Potential catalysts are better-than-expected improvement in operating figures or updates on the Northpoint AEI.
Results highlight, a stable quarter
- FCT’s 3Q/9MFY15 DPUs were in line, at 26% and 74% of our full-year forecasts.
- Revenue was up 14% and NPI rose 12% yoy, largely due to additional contributions from Changi City Point (CCP).
- During the quarter, FCT recorded 5.3% rental reversion for 5.9% of the portfolio leases renewed, bringing total rental reversion for 9MFY15 to 6.2%.
- Portfolio occupancy dipped marginally to 96.5% from 97.1% in 2Q, largely due to Bedok Point which saw the exit of an anchor tenant.
- Occupancy at Causeway Point (CWP) and Northpoint (NP) were steady at 99% while CCP’s occupancy improved to 92.4%.
Healthy operating matrix
- Excluding CCP, FCT registered 3.6% yoy growth in shopper traffic during the quarter, largely propped up by CWP (+4.4% yoy) and NP (6.6% yoy).
- Tenant sales also grew 2.2% yoy for the 3-month period ended May 2015, again driven mainly by CWP.
- Another 7.1% of leases by rental income are set to expire this year, mainly at CWP, NP and Anchorpoint.
- CWP and NP have traditionally done well due to their location and we remain confident of their ability to achieve positive rental reversion.
Maintain Add
- We maintain our Add rating, given its stable outlook and 2015/2016F dividend yield of 5.8%/5.9% (slightly higher than peers’ average of 5.6%/5.8%).
- Potential catalysts are better-than-expected improvement in operating figures or updates on the Northpoint AEI.
- Management highlighted that while there could be some displacement of tenants during the Northpoint AEI, FCT’s track record for such exercise remains positive with double digit ROIs.
(TAN Xuan, CFA; PANG Ti Wee; LOCK Mun Yee)
Source: http://research.itradecimb.com/
