Frasers Centrepoint Trust - UOB Kay Hian 2018-07-25: 2Q18 Results In Line

Frasers Centrepoint Trust - UOB Kay Hian Research 2018-07-25: 2q18 Results In Line FRASERS CENTREPOINT TRUST SGX:J69U

Frasers Centrepoint Trust - 2Q18 Results In Line

  • Frasers Centrepoint Trust’s 3QFY18 DPU was up 1.8% y-o-y due to higher contributions from its three larger malls.
  • Maintain BUY; target price S$2.32.

Another set of stellar results.

  • Frasers Centrepoint Trust’s 3QFY18 DPU of 3.053 S cents improved 1.8% y-o-y, underpinned by Northpoint City North Wing’s higher occupancy and improved rental. Results were in line with our expectations, with 9MFY18 DPU of 9.153 S cents (+2.5% y-o-y) accounting for 75% of our full-year estimate.

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Stable portfolio occupancy.

  • Overall portfolio occupancy was stable at 94.0% q-o-q. Changi City Point enjoyed a higher occupancy rate of 92.9% (2QFY18: 90.6%) but this was mitigated by Anchorpoint’s decline in occupancy to 87.8% (2QFY18: 93.3%) due to the departure of a F&B tenant. 4.6% of expiring leases area are due to be renewed in FY18 and 26.2% to be renewed in FY19. The portfolio WALE is 2.01 years.
  • Management also expects Northpoint City North Wing’s occupancy to increase from the current 92.5% to around 97% as they have secured pre-commitment leases.

Solid rental reversions.

  • Frasers Centrepoint Trust’s 3QFY18 average rental reversion was +5.0%. Northpoint City North Wing enjoyed a 25.8% rental reversion due to a lease renewal by a financial services company. Elsewhere, Anchorpoint’s rental reversion was -32.8% but this is due to two small units, including a kiosk.

Singapore retail rents stabilising.

  • Average prime retail rent (+0.2% q-o-q) increased for the second consecutive quarter, with prime retail rents in Orchard Road (flat q-o-q, +0.5% y-o-y) and suburban (+0.5% q-o-q, +1.0% y-o-y), according to CBRE. Supply of another 0.91m sf and 1.07m sf in NLA are expected to come on stream in 2018 and 2019 respectively.

Gearing increased marginally to 29.3% (1Q18: 29.2%).

  • Frasers Centrepoint Trust still has available debt headroom of S$434m. Frasers Centrepoint Trust also has 55% of its borrowings on fixed rates, which would partially mitigate against the rise in interest rates.

Maintain BUY with a lower target price of S$2.32.

  • This is to reflect a 25bp rise in our risk-free rate assumption to 2.75%.
  • Our valuation is based on DDM (required rate of return: 7.6%, terminal growth: 2.0%).

Andrew Chow CFA UOB Kay Hian Research | Loke Peihao UOB Kay Hian | https://research.uobkayhian.com/ 2018-07-25
SGX Stock Analyst Report BUY Maintain BUY 2.32 Down 2.430