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
