Frasers Centrepoint Trust - UOB Kay Hian 2017-10-26: 4QFY17 Results Of FCT In Line

FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - 4QFY17 Results Of FCT In Line

Results of Frasers Centrepoint Trust (FCT) in line with our expectations.
The integration works at Northpoint is nearing its final stages and is resulting in improved occupancy and rental income contribution to the overall portfolio.
Maintain BUY on FCT with a raised target price of S$2.43.

Results in line with expectations; maintain BUY with a raised target price of S$2.43 (from S$2.26), based on DDM (required rate of return: 6.3%, terminal growth: 1.8%). This mainly factors in the DPU accretion from Northpoint AEI and 0.3% increase in terminal growth rate on better growth prospects.

The quarter saw gross revenue and NPI increase 8.1% yoy and 10.0% yoy, respectively, due mainly to higher rental income and improved occupancy at Northpoint North Wing (NPNW). Causeway Point and Changi Point also grew 2.5% yoy and 13.6% yoy respectively, contributing to the strong 4QFY17 results.
Results were in line with expectations, with FY17 coming in at 101.7% of our full-year estimates.

Positive rental reversions at +8.3% in 4QFY17, with Causeway Point accounting for 84.4% of the leased area renewed in 4QFY17.
Other than Bedok Point, YeeTee Point and Yishun 10 which had no renewals, there were positive reversions at Causeway Point (+7.6%), NPNW (+24.4%), Changi City Point (+7.4%), and Anchor Point (+2.1%).

4QFY17 borrowing costs came in at 2.3%, increasing only marginally (+0.1%) as compared with the previous quarter.

The integration works at Northpoint City South Wing are in its final stages, with more than 95% of the reconfigured areas being leased and handed over to the tenants.
By the end of FY17, Northpoint’s occupancy had increased 10.7ppt yoy to 81.6%, while overall portfolio occupancy increased 2.6ppt yoy to 92.0%.

Average prime retail rents islandwide stabilised at S$24.75psf/month, amid the challenging retail environment with landlords becoming more flexible in providing concessions to entice new tenants and being less selective in terms of tenant profile.
Downward pressure on retail rents is likely to continue in 2017/18 with a further 0.60m sf and 1.62m sf of new supply coming on-stream in 4Q17 and 2018 respectively.
Management noted that although the general retail sector continues to face structural challenges, FCT’s well located suburban malls continue to remain resilient.

Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | http://research.uobkayhian.com/ 2017-10-26

UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 2.43 Up 2.260