Frasers Centrepoint Trust - CGS-CIMB Research 2018-07-24: Growing Steadily

Frasers Centrepoint Trust - CGS-CIMB Research 2018-07-24: Growing Steadily FRASERS CENTREPOINT TRUST SGX:J69U

Frasers Centrepoint Trust - Growing Steadily

  • Frasers Centrepoint Trust's 9MFY9/18 DPU of 9.153 Scts was within expectations, at 74% of FY18F forecast. 
  • 3QFY18 boosted by better occupancy and positive rental reversions from larger malls. 
  • We expect the larger malls to continue driving growth with higher footfall, occupancy rate and rental reversions. 
  • Healthy balance sheet; well positioned for inorganic growth. 
  • Maintain ADD with unchanged Target Price of S$2.41. 

3QFY9/18 results highlights

  • Frasers Centrepoint Trust (FCT)’s 3QFY9/18 performance was in line, with gross revenue up 10.9% y-o-y to S$48.3m, thanks to higher portfolio occupancy and positive rental reversions. Distribution income of S$28.3m up 74% of our FY18F forecast. io.

Occupancy remained high

  • Topline growth was largely due to higher contributions from Northpoint North Wing (NPNW) (+35.9% y-o-y to S$13m), Causeway Point (CP) (+3.8% y-o-y to S$21.8m) and Changi City Point (CCP) (+15.8% y-o-y to S$6.5m). 
  • While portfolio occupancy was flat q-o-q at 94%, it has improved by 6.9% pts versus a year ago, driven by Causeway Point, Northpoint North Wing and Changi City Point. Northpoint North Wing’s occupancy rate declined as it included Yishun 10 Retail Podium which has only a 50% occupancy rate. Excluding Yishun 10, occupancy rate would have been 95.2%. io.

Rental reversion at +5% in 3QFY18

  • The trust registered a solid +5% rental reversion this quarter on the renewal of 4% of its NLA, mainly driven by better rental rates at YewTee Point (YTP) and Changi City Point. Northpoint North Wing reported a strong 25.8% rental reversion on a small 1.1% of the mall’s NLA as one tenant expanded to the next lot at a high rental rate. io.

Higher shopper traffic at the larger malls

  • Overall portfolio shopper traffic excluding Northpoint North Wing was up 1.2% y-o-y. Causeway Point and Changi City Point’s traffic increased by an average of 5% y-o-y while traffic for Northpoint City increased by nearly double-digits as the trust combined the traffic of North and South Wing. The three smaller malls, namely Bedok Point, YewTee Point  and Anchor Point saw a decline in shopper traffic y-o-y. 
  • Tenant sales in 3QFY18 were up 3.4% y-o-y, mainly due to Northpoint North Wing and Changi City Point, partially offset by lower tenant sales at the remaining malls. 
  • Frasers Centrepoint Trust is constructing an underground pedestrian link connecting the basement 1 of Causeway Point and Woods Square to increase footfall. The works will commence at end-Feb 2019 and should be completed by Dec 2019. ROI is estimated to be mid-single digits against cost of S$15m. io.

Expect continued positive renewals

  • Frasers Centrepoint Trust has another 6.6% and 2764% of its debt on a fixed-rate basis. 
  • On the acquisition and asset disposal front, Bedok Point, which has a relatively low occupancy rate, could be a disposal candidate. However, management has also indicated that retail assets in Singapore are scarce. io.

Maintain ADD

  • We leave our FY18-20F DPU estimates unchanged and maintain our DDM-based Target Price of S$2.41. We continue to like Frasers Centrepoint Trust for its exposure to the more stable non-discretionary retail segment. 
  • Upside risk could come from new acquisitions while downside risk could come from slower-than-expected rental reversion. io.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2018-07-24
SGX Stock Analyst Report ADD Maintain ADD 2.410 Same 2.410