Frasers Centrepoint Trust - OCBC Investment 2018-10-25: A Blip But Full-Year Growth Still Positive


Frasers Centrepoint Trust - A Blip But Full-Year Growth Still Positive

  • Frasers Centrepoint Trust 4QFY18 DPU dipped 3.6% y-o-y.
  • Cap rate compression.
  • Rental reversion +0.2% for quarter.

4QFY18 results in-line with our expectations

  • Frasers Centrepoint Trust (FCT) reported an in-line set of 4QFY18 results.
  • Gross revenue rose 0.5% y-o-y to S$48.5m, but NPI was down 4.9% to S$32.9m due to higher property tax for Northpoint City North Wing (NPNW) and increases in utilities tariff rates, professional fees and more ad-hoc repair and replacement works. Some of these expenses are one-off in nature.
  • Results were also impacted by FRS 17 and 39 accounting adjustments (no impact on distributable income). Excluding this, 4QFY18 revenue would have increased 5.3% y-o-y to S$48.2m and NPI would have been 1.4% higher at S$32.6m.
  • 4QFY18 DPU fell 3.6% y-o-y to 2.862 S cents. If we strip out the one-off property expenses as highlighted earlier, DPU would have come in flat.
  • For FY18, Frasers Centrepoint Trust’s gross revenue and NPI grew 6.5% and 5.9% to S$193.3m and S$137.2m, respectively. DPU of 12.02 S cents represented growth of 1.0%, and constituted 98.7% of our FY18 projection.

Cap rates tightened across most assets

  • All of Frasers Centrepoint Trust (FCT)’s properties, with the exception of Northpoint City North Wing, saw a compression in cap rates by 15-25 bps during its valuation exercise. This was due to transactions observed in the market and a change in valuer for some of the properties.
  • Although Bedok Point and Yishun 10 retail podium registered a lower valuation, this was offset by increases for the other properties, such that overall portfolio valuation rose 3.0% to S$2.75b.

Expecting higher occupancy ahead

  • Frasers Centrepoint Trust (FCT)’s portfolio occupancy improved 0.7 ppt q-o-q to 94.7%. Bedok Point and Anchorpoint have secured leasing commitment from new F&B tenants and hence their occupancy is expected to increase ahead.
  • Overall rental reversions came in at only a mild +0.2% in 4QFY18, but were 3.2% higher for the full-year (FY17: 5.1%).
  • Northpoint City’s shopper traffic (includes both North Wing and South Wing) jumped 36.5% y-o-y following the completion of its AEI. Excluding this, Frasers Centrepoint Trust’s portfolio footfall still rose a commendable 5.0%. Tenants’ sales (Jun-Aug 2018) grew 3.6% y-o-y.
  • We trim our DPU forecasts for FY19 and FY20 by 2.1% and 2.4%, respectively, as we factor in higher finance costs and lower distribution from associates and JVs. 
  • As we also roll forward our valuations, our fair value inches up from S$2.49 to $2.50.

Andy Wong Teck Ching CFA OCBC Investment Research | https://www.iocbc.com/ 2018-10-25
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