Frasers Centrepoint Trust - OCBC Investment 2017-10-26: Projecting Another Record DPU In FY18

Frasers Centrepoint Trust - OCBC Investment 2017-10-26: Projecting Another Record DPU In FY18 FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Projecting Another Record DPU In FY18

  • 4QFY17 DPU rose 5.5% YoY.
  • Full-year rental reversion of 5.1%.
  • Higher portfolio valuation.

4QFY17 results in-line with our expectations 

  • Frasers Centrepoint Trust (FCT) reported a decent set of 4QFY17 results which met our expectations. 
  • Gross revenue rose 8.1% YoY to S$48.2m due largely to improvement at Northpoint City North Wing (NPNW) as the mall is nearing the completion of its AEI. NPI and DPU grew 10.0% and 5.5% YoY to S$34.6m and 2.97 S cents, respectively. 
  • For its full-year performance, FCT saw slightly lower gross revenue of S$181.6m (-1.2%) and this formed 100.5% of our forecast. DPU of 11.90 S cents represented an increase of 1.2% and constituted 100.7% of our full-year projection. This was another record high for the trust and its eleventh consecutive year of growth since its listing.

Rental reversions healthy; occupancy improved 

  • Operationally, FCT’s portfolio occupancy jumped 4.9 ppt QoQ to 92.0% due largely to improvement at NPNW, Changi City Point and Bedok Point. Rental reversions were also robust, coming in at 8.3% for the quarter, and 5.1% for the full-year. There was, however, still some softness in overall portfolio shopper traffic and tenant sales, which declined 9.9% and 2.0% (period from Jun to Aug 2017) YoY, respectively.
  • If we exclude NPNW due to the AEI, footfall would have fallen by a smaller magnitude of 2.5% YoY. 
  • For its portfolio revaluation exercise, cap rates were compressed by 25-60 bps, resulting in higher valuation for all its assets with the exception of Bedok Point.

Raise FV and maintain BUY 

  • We factor in FCT’s full-year results in our model, and make some minor adjustments to our assumptions. Although we trim our gross revenue forecasts by approximately 1.3%-1.4%, our NPI projections remain unchanged as we build in slightly higher margin assumptions. 
  • We expect FCT to deliver another record DPU for its unitholders in FY18, with stable growth of 2.3% to 12.2 S cents. This translates into a distribution yield of 5.5%. 
  • On account of FCT’s continued solid track record, re-rating momentum in the SREITs sector, improved consumer sentiment and strong balance sheet, we apply a lower discount rate of 6.7% (previously 6.9%) in our DDM valuations. 
  • Rolling forward our estimates, our fair value is raised from S$2.28 to S$2.40.
  • Maintain BUY.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-10-26
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.40 Up 2.280