Frasers Centrepoint Trust - CIMB Research 2016-01-22: Still tracking upwards

Frasers Centrepoint Trust - CIMB Research 2016-01-25: Still tracking upwards FRASERS CENTREPOINT TRUST J69U.SI 

Frasers Centrepoint Trust - Still tracking upwards 

  • Margin improvement lifts 1QFY16 bottom line. 
  • Strong rental reversions in 1QFY16, driven by Northpoint. 
  • Bedok Point could see higher occupancy after securing an anchor tenant. 
  • Northpoint AEI to start; occupancy could dip to 76% during the initial period. 
  • Maintain Add with a lower DDM-based target price of S$2.07. 

■ Better margins boost bottom line 

  • FCT reported a 4.4% rise in 1QFY16 DPU to 2.87 Scts, largely in line with our expectations at 24% of our full-year forecast. This was achieved despite the slight drop in topline to S$47.1m, as higher margins helped to nudge up NPI. 
  • The NPI margin of 71.3% was better the 69.7% attained a year ago, thanks to lower utility tariffs and fewer maintenance and replacement works. 

■ Strong rental reversion of 13.7% 

  • 1QFY16 saw average portfolio rental reversion of 13.7%, even as occupancy slipped 1.5% pts to 94.5% due to softer demand for new and renewal leases at Bedok Point (BP) and Changi City Point (CCP). Northpoint (NP) experienced some frictional vacancy despite achieving higher reversion rents. But this was more than offset by higher renewals at Causeway Point. 
  • Despite the competitive retail environment, shopper traffic grew 6% yoy while tenant sales continued to tick up 1.9% yoy. 

■ Occupancy at Bedok Point to recover with anchor tenant secured 

  • Looking ahead, we expect occupancy at Bedok Point to improve from its present 77% as its new anchor tenant is currently fitting out and scheduled to begin in Mar. 
  • The trust has also provided more details on its upcoming AEI for Northpoint Centre which is scheduled to commence in Mar 16, and complete by Sep 17. 

■ Lower occupancy expected at NP during AEI 

  • The makeover at NP would focus on enhancing shopper experience and boosting the variety of retail offerings. This will also enable NP to benefit from its integration with the upcoming retail component at Northpoint City. During this period, management has guided that average mall occupancy could slip to 76% in Mar-Sep 16, from the present 98%. 

■ Maintain Add 

  • We have adjusted our FY16 and FY17 estimates to take into account the lower occupancy expected during the AEI period. 
  • Correspondingly, our DDM-based target price is lowered to S$2.07. We maintain our Add rating with potential upside of 12.5%.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2016-01-22
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 2.07 Down 2.22