Frasers Centrepoint Trust - RHB Invest 2016-06-10: Top Pick of retail REITs

FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Top Pick of retail REITs

CBRE released 2Q16 retail rents data. In brief, although both declined slightly suburban rents outperformed prime orchard road.
Suburban retail rents have fallen 0.7% QoQ to SGD29.45 psf/mth, while rents in orchard road declined 1.1% QoQ to SGD32.50psf/mth. This confirms our preference for suburban mall space, as it proves to be highly resilient.

In regards to orchard road rents, we would like to highlight two pointers to investors:
1. Rental rates within Orchard Road should be supported by the lack of supply pipeline in the region.
2. We are expecting stronger headwinds for other property asset classes, such as office and industrial, as compared to the retail segment.
Therefore, we remain our preference for retail REITs, with Frasers Centrepoint Trust (FCT SP, Buy TP: SGD2.22) as our top pick of the sector.
The REIT yields 6.0%, with low gearing ratio of 28.3%.

Ivan Looi RHB Invest | Vijay Natarajan RHB Invest | http://www.rhbinvest.com.sg/ 2016-06-10

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 2.22 Same 2.22