Frasers Centrepoint Trust - UOB Kay Hian 2017-01-23: 4Q16 Results Of FCT In Line With Expectations

Frasers Centrepoint Trust - UOB Kay Hian 2017-01-23: 4Q16 Results Of FCT In Line With Expectations FRASERS CENTREPOINT TRUST J69U.SI

REITs − Singapore - 4Q16 Results Of CMT And FCT In Line With Expectations

  • The results of CMT and Frasers Centrepoint Trust (FCT) both came in in line with expectations. Both retail REIT managers have re-iterated a subdued outlook on the domestic retail sector.
  • Maintain HOLD on FCT with an unchanged target price of S$2.15.


  • CapitaLand Mall Trust (CMT) and Frasers Centrepoint Trust (FCT) have reported their quarterly results.


Frasers Centrepoint Trust (FCT SP/HOLD/S$1.965/Target: S$2.15) 

  • Results in line with expectations; maintain HOLD with an unchanged target price of S$2.15. Entry price: S$1.87. 
  • Our valuation is based on a two-stage dividend discount model (required rate of return: 6.3%, terminal growth rate: 1.2%). 
  • 1QFY17 DPU of 2.89 S cents was up 0.7% yoy. 1QFY17 revenue and net property income declined 6.4% yoy and 5.7% yoy respectively mainly due to Northpoint’s AEI. 
  • The higher DPU despite the NPI decline mainly resulted from the REIT manager accepting 70% of fees (base and performance) in units instead of cash compared to 20% last year. 
  • The results were in line with our expectations, with 1FY17 DPU coming in at 24.8% of full-year forecast.

Near-term challenges despite expectations of positive rental reversions. 

  • While management expects to see positive reversions in FY17, it has highlighted existing near-term challenges. 
  • Bedok Point, (12.1% of FY17’s expiring leases) could see negative reversions. This could be offset by healthy performance at Causeway Point (+10.6% reversions in 1QFY17), which accounts for 37.3% of FY17’s expiring leases by NLA.

Northpoint AEI. 

  • Asset occupancy (81.1% as of Dec 16) is expected to hit a low of 58% next month. 
  • The AEI, which commenced in Mar 16, will also see Northpoint’s NLA decline by 4% due to reconfiguration works. The project is expected to be completed in Sep 17.

Shopper traffic still not directly translating to tenant sales. 

  • Shopper traffic was up 2.7% yoy in 4QFY16, while tenant sales was down 10.1% yoy from Sep 16- Nov 16.
  • Excluding the impact of AEI at Northpoint and tenant changeover at Changi City Point mall, tenant sales was still down 2.4% yoy. This dislocation echoes the previous quarter’s operating performance. 
  • Management noted that the retail sector continues to face headwinds, though they expect portfolio performance to remain resilient, owing to the relatively higher necessity spending (vs discretionary) at suburban malls. 
  • They also continue to express confidence in Northpoint’s expected performance post AEI, pointing to keen tenant interest in pre-commitments.

Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-01-23
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 2.150 Same 2.150