Maybank Kim Eng Research 2015-07-23: Frasers Centerpoint Trust - Steady as she goes. Maintain HOLD.

Steady as she goes 

  • Results in-line. Growth driven by Changi City Point. 
  • Resilient rental reversions as FCT malls face little competition. No change to forecasts. 
  • Positives are priced in. Maintain HOLD & DDM TP of SGD2.03 (CoE 7.7%, LTG 2%). For retail sector exposure, we like Starhill Global. 

Growth from Changi and respectable reversions 

  • 3Q revenue was SGD47.1m (-0.8% QoQ, +14.3% YoY), NPI, SGD32.9m (-2% QoQ, +12.8% YoY) and DPU, 3.04cts (+2.5% QoQ, +0.5% YoY). 
  • All were broadly in line. 9M15 revenue formed 74.2% of our FY15F, NPI, 73.8% and DPU, 75.2%. 
  • Growth was led mainly by Changi City Point, acquired in the middle of 3QFY14. 
  • This property single-handedly accounted for 88% of its revenue growth. 
  • The remainder of the growth came from step-ups and still-respectable average rental reversions of 5.3%, up from 2Q’s 3.8%. 
  • 9M15 reversions tracked 6.2%, commendable in this poor retail environment. The reason was, and still is, none of its malls - apart from Bedok Point (3.6% NPI) - faces any serious competition. 
  • Northpoint (27.8% NPI) and Causeway Point (45.6% NPI) practically monopolise their catchment areas. 
  • Occupancy was stable at 96.5%, slightly down QoQ from 97.1% due to tenancy changeovers at Yew Tee, and Bedok Point’s continued struggle against neighbouring Bedok Mall. 
  • Management is optimistic on the remaining lease expiries, at 7% of FY15F revenue. 
  • Shopper traffic and tenant sales grew 3.6% and 2.2% YoY respectively for its portfolio. 

Maintain forecasts and HOLD rating 

  • While we like FCT’s exposure to non-discretionary spending and its lack of serious competition, we believe these are in its price. 
  • Maintain forecasts, HOLD and our DDM-based TP of SGD2.03. 
  • FY9/15-17 yields are fair at 5.7-5.9%, in our view.

(Joshua Tan)

Source: http://www.maybank-ke.com.sg