Frasers Centrepoint Trust - UOB Kay Hian 2019-10-24: 4QFY19 Waterway Point & PGIM Start To Contribute; Upgrade To BUY


Frasers Centrepoint Trust - 4QFY19 Waterway Point & PGIM Start To Contribute; Upgrade To BUY

  • Frasers Centrepoint Trust reported good results with 4QFY19 DPU at 2.91 S cents, up 1.8% y-o-y.
  • Revenue from Northpoint City North Wing, Changi City Point and Yew Tee Point grew 5.3%, 3.6% and 5.7% y-o-y respectively, excluding FRS adjustments. Frasers Centrepoint Trust continues to maintain positive rental reversion at 3.9%. Frasers Centrepoint Trust is resilient due to its focus on suburban retail malls.
  • Frasers Centrepoint Trust has been included in the FTSE EPRA/NAREIT Global Real Estate Index Series (Global Developed Index) since 23 Sep 19.
  • Upgrade to BUY. Target price: S$3.05.


Steady growth in underlying performance.

  • 4QFY19 gross revenue and NPI decreased marginally by 0.5% and 0.1% y-o-y due to FRS 116 and 109 adjustments, which are non-cash and do not affect distributable income. Excluding these adjustments, revenue and NPI grew 2.8% and 4.8% y-o-y. Revenue from Northpoint City North Wing, Changi City Point, and Yew Tee Point grew 5.3%, 3.6% and 5.7% excluding FRS adjustments.
  • Frasers Centrepoint Trust achieved positive 4QFY19 rental reversion (+3.9% q-o-q), led by Changi City Point (+10.3%), Northpoint City North Wing (+5.6%), Anchorpoint (+5.1%), Causeway Point (+4.4%), YewTee Point (+4.3%) and Waterway Point (4.1%). 63 renewals accounting for 4.6% of portfolio NLA were signed during the quarter.
  • Portfolio occupancy remained stable at 96.5% (-0.3ppt q-o-q), but is higher compared with 94.7% in the same quarter last year. Causeway Point saw 97% occupancy (-1.4ppt y-o-y) in 4QFY19, due to enhancement works relating to construction of the underground pedestrian link to Woods Square at basement 1, which is expected to complete in Dec 19. Anchorpoint’s current occupancy of 79.0% is expected to improve to 94.2%, when new tenants complete their fitting-out in Oct and Nov 19.
  • Gearing increased to 32.9% (+9.4ppt q-o-q), which includes Frasers Centrepoint Trust’s proportionate share of assets and underlying borrowings in Sapphire Star Trust, which holds Waterway Point. All-in interest cost remained stable at 2.6% (-0.1ppt q-o-q), and about 50% of its borrowings are on fixed rates or hedged with interest rate swaps.

Maiden contribution from Waterway Point.

  • Frasers Centrepoint Trust’s share of revenue and NPI in Sapphire Star Trust for the period of 12 Jul 19 to 30 Sep 19 were S$5.7m and S$4.5m respectively. Waterway Point achieved healthy occupancy at 98%. Frasers Centrepoint Trust has increased its stake in Sapphire Star Trust by 6.6% from 33.3% to 40% on 18 Sep 19.

NAV/share rose 6.3% y-o-y to S$2.21.

  • Frasers Centrepoint Trust recognised revaluation gains on investment properties of S$93.3m, mainly from Causeway Point (S$80m) and Changi City Point (S$10m).


Focused on necessity spending at suburban malls.

  • The recent acquisition of a 40% stake in Waterway Point and 24.8% stake in PGIM Real Estate Asia Retail Fund (PGIM ARF) has reinforced Frasers Centrepoint Trust’s strength in suburban retail mall operations. There are 312 leases with total NLA of 457,060sf (35.7% of gross rental) expiring in FY20. 44% of these retail spaces are already pre-committed. Management is confident of achieving single-digit positive rental reversion in FY20.
  • Frasers Centrepoint Trust was included in the FTSE EPRA/NAREIT Global Real Estate Index Series (Global Developed Index) since 23 Sep 19. See SGX Market Update: Recent SGX Additions to FTSE EPRA Nareit Global Developed Index.

Adding depth to suburban retail through Waterway Point and PGIM.

  • Frasers Centrepoint Trust has acquired 40% of Sapphire Star Trust, which holds suburban retail mall Waterway Point at 83 Punggol Central and adjacent to Punggol MRT station, for S$522.9m. Waterway Point is a 99-year leasehold 4-storey suburban family-oriented shopping mall with NLA of 371,200sf. The acquisition was completed on 11 Jul 19. Waterway Point is expected to contribute 17-18% of group NPI.
  • Frasers Centrepoint Trust’s stake in PGIM ARF has increased from 18.8% to 21.1% after some other shareholders redeemed their investments on 30 Jun 19. Frasers Centrepoint Trust subsequently further increased its stake to 24.8%.

Pipeline of assets from sponsor supports next phase of growth.




  • Positive newsflow on rising retail rentals, yield-accretive acquisitions or asset enhancement initiatives.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2019-10-24
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