Frasers Centrepoint Trust - OCBC Investment 2019-01-22: Goodbye To You My Trusted Friend

FRASERS CENTREPOINT TRUST (SGX:J69U)

Frasers Centrepoint Trust - Goodbye To You My Trusted Friend

FRASERS CENTREPOINT TRUST (SGX:J69U) reported its 1QFY19 results which met our expectations. Gross revenue increased 2.9% y-o-y to S$49.3m while property operating expenses increased at a faster clip of 3.7% due to higher marketing expenses and carpark expenses for Anchorpoint. These culminated in a 2.5% y-o-y growth in NPI to S$35.4m, or 24.5% of our FY19 forecast.

DPU rose 0.7% y-o-y 3.02 S cents, as Frasers Centrepoint Trust chose to take 20% of its management fees in units (1QFY18: 50%), while there was also a slight boost from a payout of S$330k of taxable income available for distribution which was retained previously.
1QFY19 DPU formed 24.7% of our full-year forecast.

Two of the positive highlights from the quarter came from Frasers Centrepoint Trust’s strong positive rental reversion of 6.9% and improved occupancies across all its properties (overall +1.7 ppt q-o-q to 96.4%). The former was led by Causeway Point, which delivered a robust rental uplift of 11.1% and this was for a sizeable 19.8% of the mall’s NLA. This was in turn driven by a strong rental reversion from an anchor tenant. YewTee Point and Changi City Point also clocked in positive rental reversions of 5.4% and 1.9%, respectively.
On the other hand, Anchorpoint (-12.1% due to a replacement tenant with a lower rental than the previous tenant), Bedok Point (-2.8% for 1.9% of the mall’s NLA) and North Point City North Wing (-1.3% for 4.0% of the mall’s NLA) had negative rental reversions.

Separately, Frasers Centrepoint Trust announced that its CEO Dr Chew Tuan Chiong, had informed the Board of his intention to retire as CEO before the end of 2019. Dr Chew, who will be turning 62 years old this year, joined Frasers Centrepoint Trust as CEO in 2010 and was instrumental in continuing Frasers Centrepoint Trust’s strong track record of growing its DPU every financial year since he joined the helm.
While we clearly see Dr Chew’s retirement as a loss for Frasers Centrepoint Trust, its Chairman highlighted during the AGM that there will be a smooth transition and a successor will be announced in due course.
We keep our fair value of S$2.50 for now.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2019-01-22

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