Frasers Centrepoint Trust - OCBC Investment 2016-04-25: Unyielding despite industry headwinds

Frasers Centrepoint Trust - OCBC Investment 2016-04-25: Unyielding despite industry headwinds FRASERS CENTREPOINT TRUST J69U.SI 

Frasers Centrepoint Trust: Unyielding despite industry headwinds 

  • 2QFY16 DPU +2.6% YoY 
  • Positive rental reversions of 5.6% 
  • More details on Northpoint AEI 

In-line set of 2QFY16 results 

  • Frasers Centrepoint Trust (FCT) reported its 2QFY16 results which came in within our expectations. 
  • Gross revenue was down marginally by 0.8% YoY to S$47.1m, but NPI rose 0.4% to S$33.7m due to lower utility tariff rates and write-back of provision for property tax as a result of resolved property tax appeals and objections. 
  • DPU increased 2.6% to 3.039 S cents although management had retained S$1.1m of taxable income available for distribution (or 0.116 S cents per unit) in 2QFY16 (2QFY15: nil). 
  • For 1HFY16, FCT’s gross revenue slipped slightly by 0.5% to S$94.2m and this made up 48.6% of our FY16 forecast. 
  • DPU of 5.909 S cents represented growth of 3.4% and formed 50.1% of our full-year forecast. 

Operational metrics reflect defensiveness of portfolio 

  • During the quarter, FCT delivered average positive rental reversions of 5.6%, with strong growth led by Changi City Point (+17.4%) and Causeway Point (+8.7%), but partially offset by Bedok Point (-26.9%). 
  • Shopper traffic grew 11.4% YoY to 25.9m, while tenants’ sales rose 2.1% for the period from Dec 2015 to Feb 2016. 
  • Portfolio occupancy declined from 94.5% as at end Dec 2015 to 92.0% due largely to the commencement of AEI at Northpoint (NP) in Mar. We note that this AEI and its potential near-term impact had previously been well communicated by FCT to the market. 
  • Management provided further updates, highlighting that capex for the AEI is budgeted at S$60m and this would be funded by borrowings and internal resources. Although the NLA of NP is projected to be reduced by 4% due to reconfiguration of the mall, FCT expects average gross rental rates to be boosted by ~9% following the completion of the AEI. 
  • From 3QFY16 to 4QFY16, occupancy at NP is forecasted to hover between 72% and 86% (2QFY16: 81.7%). 

Maintain BUY 

  • Given this in-line set of results, we retain our forecasts, and reiterate our BUY rating and S$2.25 fair value on FCT. 
  • The stock currently offers FY16F distribution yield of 5.9%, based on our forecasts. 

Wong Teck Ching Andy CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-04-25
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 2.25 Same 2.25