Frasers Centrepoint Trust - CIMB Research 2015-12-09: Chugging along

Frasers Centrepoint Trust - CIMB Research 2015-12-09: Chugging along FRASERS CENTREPOINT TRUST J69U.SI 

Frasers Centrepoint Trust - Chugging along 

  • High occupancy underpins earnings momentum. 
  • Shopper traffic and tenant sales are still rising. 
  • Northpoint AEI to start early 2016. 
  • Deep balance sheet capacity for acquisitions; low gearing of 28.2% translates to significant debt headroom. 
  • Maintain Add with a target price of S$2.22. 

■ Portfolio occupancy remains at a healthy 96% 

  • Portfolio occupancy remained relatively stable at 96%, with take-ups at Causeway Point (CWP), Northpoint (NP) and Anchorpoint holding steady. 
  • Changi City Point (CCP) saw some fluctuation in occupancy levels due to the ongoing tenant remixing. 
  • Bedok Point occupancy remained at 84.2% and management will continue to look at avenues to improve this position. 

■ Shopper traffic and tenant sales trending up 

  • Portfolio shopper traffic grew 8.2% in 4QFY15, 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% during the quarter. 
  • CP and YewTee Point saw high single-digit reversions while Anchorpoint enjoyed a 14.7% upside from lease renewals. This bodes well for the 30% and 35% of portfolio gross rents due to be re-contracted in FY16 and FY17 respectively. 

■ Northpoint AEI to commence in Mar 16 

  • NP AEI is scheduled to commence in Mar 16, and to be completed over the next 18 months. 
  • The AEI will focus on enhancing shopper experience by boosting 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 it expects to generate positive return upon completion of the AEI. 
  • Previous AEI had generated >10% ROI. 

■ Deep pipeline from sponsor 

  • FCT has a deep potential acquisition pipeline from its sponsor. This includes the Waterway Point and Northpoint City, which are currently under development. 
  • With a low gearing of 28.2%, FCT has significant debt headroom to fund new purchases in the longer run. 

■ Maintain Add rating 

  • We maintain our Add rating given FCT’s stable outlook and FY16-17F dividend yield of 6.4-6.5%. 
  • Our DDM-backed target price of S$2.22 offers investors 18% 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/ 2015-12-09
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 2.22 Same 2.22