Frasers Centrepoint Trust - CGS-CIMB Research 2019-01-21: Strong Performance From The Larger Malls


Frasers Centrepoint Trust - Strong Performance From The Larger Malls

  • Frasers Centrepoint Trust's 1QFY19 DPU was in line with our expectations at 24.9% of our full-year forecast.
  • We expect the larger malls to continue delivering good performance. This should offset any weakness from the smaller malls going forward.
  • Maintain ADD at an unchanged DDM-based Target Price of S$2.35.

1QFY19 results highlights

  • FRASERS CENTREPOINT TRUST (SGX:J69U)’s 1QFY19 DPU of S$3.02 cents was in line with our expectations at 24.9% of our full-year forecast.
  • Revenue increased 2.9% to S$49.3m, while net property income (NPI) increased at a slower rate of 2.5% due to the higher marketing and carpark expenses incurred for Anchor Point (AP) whose carpark management commenced from 1 Dec 2017. This, coupled with the slightly higher borrowing cost from increased loans and management fees arising from the increase in NPI and total assets, resulted in a flattish net income, improving by 0.9% y-o-y to S$25.7m.
  • DPU increased 0.7% y-o-y to 3.02 Scts.

Larger malls continued to deliver encouraging performance

  • Larger malls continued to perform, with positive revenue and NPI growth. Changi City Point (CCP) reported the strongest y-o-y growth of 12.5%, thanks to the opening of Downtown Line since Oct 2017 which helped to improve shopper traffic and tenants’ sales.
  • Despite the high revenue base, Northpoint City North Wing (NCNW) and Causeway Point (CP) continued to report encouraging growth of 4.5% and 1.1% respectively. Causeway Point registered strong +11.1% rental reversion on the renewal of a sizeable 20% of the mall’s NLA while Changi City Point and Northpoint City North Wing reported 1.9% and -1.3% rental reversion, respectively, on the renewal of a small ~4% of the malls’ NLA. Occupancy for these three malls remained high at 95-99%.

Performance of smaller malls remained relatively weak

  • As expected, the performance of the smaller malls remained relatively weak. Yew Tee Point (YTP), Anchor Point (AP) and Bedok Point (BP) reported y-o-y declines in NPI of 3.9%, 19% and 12.7% respectively. Occupancy for all three malls however improved on a y-o-y basis, indicating Frasers Centrepoint Trust has been focusing on filling up occupancy rather than higher rental which we think is the right strategy given that a highly occupied mall is more likely to attract higher traffic.
  • While Yew Tee Point chalked a positive rental reversion of 5.4%, Bedok Point and Anchor Point reported negative rental reversion of 2.8% and 12.1% respectively. In 2019, Bedok Point, Yew Tee Point and Anchor Point has 21%, 16.7% and 38.7% of NLA up for renewal respectively.

Maintain Add; larger malls to drive group performance

  • We maintain our ADD call on Frasers Centrepoint Trust with an unchanged Target Price.
  • We believe Causeway Point, Northpoint City North Wing and Bedok Point, which together contributed 88.6% of 1QFY19 revenue, will continue to drive the performance of the trust, offsetting any weakness from the smaller malls.
  • We continue to like Frasers Centrepoint Trust for its exposure to stable suburban malls. New acquisitions could catalyse the stock. Slower-than-expected rental reversion is a key downside risk to our call.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-01-21
SGX Stock Analyst Report ADD MAINTAIN ADD 2.350 SAME 2.350