Frasers Centrepoint Trust - UOB Kay Hian 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.

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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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.

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.

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.

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.

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