Frasers Centrepoint Trust - CIMB Research 2015-10-22: Continues to deliver

FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Continues to deliver

4QFY15 DPU grew 2.7% yoy, led by higher rental revenue and lower financing costs.
Portfolio occupancy remains high at 96%.
Increasing shopper traffic and rising tenant sales underpin ability to grow rents
Northpoint AEI to commence in Mar 2016.
Maintain Add, with DDM-based target price of S$2.22 .

FCT reported an in-line 4Q DPU of 2.86 Scts, accounting for 24% of our full-year forecast. The 2.7% yoy improvement was due to higher revenue, which grew 1.7% yoy to S$47.5m on higher income from Causeway Point (CWP), Northpoint (NP) and Changi City Point (CCP).
There was also lower finance charges as average borrowing costs dipped to 2.4% from 2.5% a year ago. FCT revalued its property portfolio 2.7% higher to S$2.46bn, with cap rates remaining stable.

Portfolio occupancy remained relatively stable at 96% with take ups at CWP, NP and Anchorpoint holding steady. CCP saw some fluctuation in occupancy level with ongoing tenant remixing. Bedok Point occupancy remained at 84.2% and management will continue to look at avenues to improve this position.

Portfolio shopper traffic grew 8.2% in 4Q, largely driven by double-digit growth in patronage at CP and NP.
Tenant sales improved in tandem. This helped to underpin positive rental reversions of 7.1% for 4QFY15. CP and YewTee Point saw high singledigit reversions while Anchorpoint enjoyed a 14.7% upside from lease renewals. This bodes well for the 30% and 35% of gross rentals due to be renewed in FY16 and FY17, respectively.

NP AEI is schedule to commence in Mar 16 and to complete over the next 18 months. The AEI will focus on enhancing shopper experience by boosting retail offering diversity and to enable the mall to benefit from the integration with the upcoming retail component of Northpoint City. There could be some tenant displacements during this period, but FCT has a good track record in managing these well and expects to generate positive return upon completion of the AEI. Previous AEIs undertaken had generated >10% ROI.

We maintain our Add rating given FCT’s stable outlook and FY16-17F dividend yield of 6.1-6.2%. Our DDM-based target price of S$2.22 offers investors 10% upside.
Potential catalyst could come when more Northpoint AEI details are revealed or from continued improvement in operating metrics.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-10-22

CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 2.22 Down 2.23