Frasers Centrepoint Trust - OCBC Investment 2016-10-24: Maintaining Its Proud DPU Track Record

Frasers Centrepoint Trust - OCBC Investment 2016-10-24: Maintaining Its Proud DPU Track Record FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Maintaining Its Proud DPU Track Record

  • 4QFY16 DPU down 1.5% YoY.
  • Robust rental reversions of 4.6%.
  • Ongoing disruption from Northpoint AEI.

4QFY16 results met our expectations 

  • Frasers Centrepoint Trust (FCT) reported its 4QFY16 results which came in within our expectations. 
  • Gross revenue was down by 6.0% YoY to S$44.6m due to its ongoing Northpoint AEI. 
  • NPI declined marginally by 0.9% to S$31.4m as the softer revenue was partially offset by lower utility tariff rates and other property expenses. Consequently, DPU decreased by 1.5% YoY to 2.815 S cents. 
  • On a full-year basis, FCT’s gross revenue and NPI slipped 2.9% and 0.9% to S$183.8m and S$129.9m, respectively, with the latter forming 100.1% of our FY16 forecast. DPU of 11.764 S cents represented a slight growth of 1.3% and made up 100.6% of our projection. 
  • Management has continued its strong track record of delivering higher DPU every year since its IPO in 2006. This now works out to ten consecutive years of DPU growth.

Robust rental reversions achieved 

  • During the quarter, FCT delivered robust average positive rental reversions of 4.6%. With the exception of Bedok Point, which had no lease renewals in 4QFY16, all its other malls recorded positive rental uplifts as compared to the preceding lease contracted previously. 
  • Strong growth was driven by Changi City Point (+14.1%) and YewTee Point (+6.6%)
  • Overall portfolio rental reversion for FY16 was 9.9%. 
  • Portfolio occupancy declined from 90.8% as at end Jun 2016 to 89.4%, which is unsurprising given the ongoing AEI at Northpoint. 
  • Shopper traffic was up 0.4% YoY in 4QFY16 to 25.2m. However, tenants’ sales for the 3-month period from Jun to Aug 2016 were down 9.5% YoY as a result of the ongoing renovation at Northpoint and changeover of an anchor tenant at Changi City Point.

Maintain BUY 

  • Looking ahead, management provided more updates on Northpoint, guiding for the mall’s occupancy to range between 72%-80% from Oct to Dec 2016, and 58%-77% from Jan to Mar next year. Average occupancy during this period is expected to be 71%. 
  • We fine-tune our assumptions and roll forward our valuations, resulting in a slightly higher fair value estimate of S$2.33 (previously S$2.32). 
  • Reiterate BUY on FCT, which remains as one of our top picks within our S-REITs coverage.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-10-24
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.33 Up 2.320