Frasers Centrepoint Trust - OCBC Investment 2017-04-26: Half-Year Scorecard Met Expectations

Frasers Centrepoint Trust - OCBC Investment 2017-04-26: Half-Year Scorecard Met Expectations FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Half-Year Scorecard Met Expectations

  • 2QFY17 DPU flat YoY.
  • Positive rental reversions of 4.1%.
  • BUY with unchanged FV.

2QFY17 results in-line with our expectations 

  • Frasers Centrepoint Trust (FCT) reported an inline set of 2QFY17 results. 
  • Gross revenue and NPI fell 2.9% and 3.3% YoY to S$45.7m and S$32.6m, respectively. This was largely due to loss of income from planned vacancies at Northpoint as a result of its ongoing AEI, with the mall’s occupancy at 60.7%, as at 31 Mar 2017. However, DPU was unchanged YoY at 3.04 S cents as management opted to take 70.0% of its management fees in units (2QFY16: 50.0%), coupled with a smaller amount of income available for distribution which was retained (S$476k in 2QFY17 versus S$1.1m in 2QFY16).
  • For FCT’s 1HFY17 performance, gross revenue and NPI slipped 4.6% and 4.5% to S$89.8m and S$64.2m, respectively, with the latter forming 49.3% of our FY17 forecast. However, DPU rose marginally by 0.4% to 5.93 S cents and constituted 50.2% of our full-year projection.

Positive rental reversions but footfall and tenant sales fell 

  • Notwithstanding the headwinds facing Singapore’s retail sector, FCT managed to register solid rental reversions of 4.1% for its portfolio in 2QFY17, with only Bedok Point showing negative rental reversions (-17.9% for 4,669 sq ft of NLA). 
  • Strong rental uplifts were achieved at Changi City Point (+21.7% for 3,670 sq ft of NLA) and Causeway Point (+6.3% for 22,920 sq ft of NLA). Management sounded more upbeat about the prospects of Changi City Point, given encouraging shopper traffic and tenant sales figures, coupled with an improvement in interest from prospective tenants. 
  • There was, however, some softness in overall portfolio footfall and tenant sales, which fell 3.5% and 6.9% (excluding Northpoint which is undergoing AEI) YoY for the Jan-Mar and Dec-Feb period, respectively. We believe this could be partly due to a leap year in 2016 and differences in timing of the Lunar New Year this year and last year, which affected consumers’ shopping patterns.

Maintain BUY 

  • Looking ahead, the Northpoint AEI is progressing on schedule, with robust leasing interest from prospective tenants. Occupancy is expected to trough in Apr at 57.0% before recovering gradually as the AEI nears completion. 
  • We maintain BUY and S$2.28 fair value estimate on FCT.

Andy Wong Teck Ching CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-04-26
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.280 Same 2.280