RHB Research 2015-07-23: Frasers Centerpoint Trust - High Suburban Resilience. Maintain BUY.

High Suburban Resilience

  • FCT announced stable 3QFY15 (Sep) results as the portfolio booked in a 5.3% positive rental reversion for the quarter. 
  • Maintain BUY with a DDM-derived TP of SGD2.22 (13.5% total return upside). 
  • We like the counter’s high resilience, especially in this volatile market. 
  • The REIT is trading at a compelling FY16 dividend yield of 5.7%, which is one of the highest among its peers. 

 Another stable quarter. 

  • Frasers Centrepoint Trust (FCT) announced a stable 3Q/9MFY15 DPU with 0.5%/4.1% YoY growth to 3.04/8.75 cents (SGD), meeting 73% of our full-year estimates. 
  • Revenue was substantially higher YoY, mainly driven by the new addition of Changi City Point (CCP) and higher revenue from all the malls, with the exception of Bedok Point. 
  • In addition, the REIT achieved a healthy rental reversion at 5.3%. 

 Strengthening its moat in North Singapore. 

  • We like the fact that the REIT owns the largest market share of malls in the northern region. 
  • Currently, its sponsor pipeline includes assets such as Northpoint 2 and Waterway Point (located within the northern/north-eastern region respectively), which should further strengthen its market share in North Singapore. 
  • We think that its moat in the northern region would provide the REIT with higher pricing power over its tenants. 

 Limited impact from Bedok Point’s underperformance. 

  • There might be some concerns over Bedok Point’s lower-than-expected performance as we see a downtrend in the mall’s revenue. 
  • However, we would like to highlight that Bedok Point contributes a mere 3.6% of the portfolio net property income (NPI), and hence does not greatly impact the overall portfolio performance. 
  • Meanwhile, we understand that management has ongoing plans to reposition the mall to better cater to the surrounding residences in Bedok. 

 Maintain BUY with a TP of SGD2.22. 

  • We continue to like FCT as we find its resilience unbeatable in non-discretionary spending, along with potential organic growth. 
  • We maintain our BUY recommendation with our TP unchanged at SGD2.22.

(Ivan Looi; Ong Kian Lin)

Source: http://www.rhbgroup.com/