Frasers Centrepoint Trust - OCBC Investment 2018-04-26: Causeway Point The Centre Of Attraction

FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Causeway Point The Centre Of Attraction

Gross revenue and NPI jumped 6.3% and 6.9% y-o-y to S$48.6m and S$34.8m, respectively. This increase was driven largely by a recovery in revenue from Northpoint City North Wing (NPNW) following the completion of its AEI. DPU rose 2.0% y-o-y to 3.10 S cents.
For 1HFY18, FCT’s gross revenue increased 7.5% to S$96.5m and accounted for 49.5% of our FY18 forecast. DPU of 6.10 S cents represented a growth of 2.9% and formed 50.1% of our full-year projection.

Overall portfolio occupancy inched up 1.4 ppt q-o-q to 94.0%, as Northpoint City North Wing (NPNW) continued its ramp up post AEI (+7.2 ppt q-o-q to 94.0%), but partially offset by Bedok Point which continues to struggle (-7.5 ppt to 77.8%).
Average portfolio rental reversions came in strongly at 9.1%, underpinned by the lease renewal of an anchor tenant at Causeway Point (CP) with a +18.9% rental reversion. This bodes well for FCT’s rental income going forward as Causeway Point contributed a significant 45.0% of its 1HFY18 gross revenue.
NPNW had a negative reversion of 6.1% but this was only for 2.1% of the mall’s NLA. We understand that some period of stabilisation is needed post AEI, but most tenants are trading well. Management provided an update that it had achieved an ROI of ~10% for this major AEI.
Portfolio shopper traffic, excluding NPNW, inched up 0.5% y-o-y. NPNW delivered a 47.8% y-o-y jump in aggregate tenants’ sales due to improvement in occupancy after AEI. Excluding NPNW, portfolio tenants’ sales were down slightly by 1.2% y-o-y from Dec 2017 to Feb 2018.

Frasers Centrepoint Trust (FCT)’s balance sheet remains healthy, with a gearing ratio of 29.2% (-0.2 ppt q-o-q), as at 31 Mar 2018. This leaves it with ample debt headroom of ~S$496m before reaching a gearing ratio of 40%. However, only 56% of its borrowings are on fixed rate/hedged, which is below the industry’s average.
Given this in-line set of results, we maintain our forecasts and S$2.49 fair value estimate on FCT.

Wong Teck Ching Andy CFA OCBC Investment | http://www.iocbc.com/ 2018-04-26

SGX Stock Analyst Report BUY Maintain BUY 2.490 Same 2.490