Frasers Centrepoint Trust - Phillip Securities 2016-04-25: Starting of the Northpoint Asset Enhancement Initiatives

FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Starting of the Northpoint Asset Enhancement Initiatives

Frasers Centrepoint Trust’s (FCT) 2Q16 DPU came in at 3.04 SG cents, a 2.6% yoy increase. Gross revenue came in relatively flat, dragged down by lower contributions from Northpoint due to low occupancies arising from the ongoing AEI.
Distributable income though, grew 6.7% yoy, primarily due to a higher percentage of management fees being paid out in units (50% vs 20% in 2Q15). This freed up more cash for distribution.

2Q16 shopper traffic (excluding Northpoint which is undergoing AEI) increased 4.2% yoy.
Tenant sales for the 3-month period (Dec 2015-Feb 2016) grew 2.1% yoy.
Gearing remains at 28.3% with average cost of borrowings dropping slightly to 2.286% (from 2.404% at FY15) due to favorable movement in interest rates which are unhedged to fixed rates.
Occupancy dipped to 92%, but was primarily caused by the AEI in Northpoint. Otherwise, we are seeing improving occupancy at Bedok Point and stable occupancies at the other malls.

The 18-month AEI commenced in March 2016 with completion expected in September 2017.
Northpoint will remain open for business during the course of the AEI. Capital expenditure on this AEI is expected to be around S$60mn, to be funded by debt and internal resources.
Even though the net lettable area of the mall is projected to be reduced by 4% due to reconfiguration of the mall, the “quality” of the retail space is expected to improve with newly reconfigured walkway designs directing more human traffic past the shops.
Management aims to improve the average gross rental rate of Northpoint by approximately 9% upon completion of the AEI.

FCT’s 1H16 revenue and DPU came in at 50.8% and 51% of our FY16 forecasts respectively.
We maintain our forecasts and DDM-derived target price of $2 but downgrade our call from ACCUMULATE to NEUTRAL on the back of the recent run-up in prices.

Tan Dehong Phillip Securities | http://www.poems.com.sg/ 2016-04-25

Phillip Securities SGX Stock Analyst Report NEUTRAL Downgrade ACCUMULATE 2.00 Same 2.00