Frasers Centrepoint Trust - DBS Research 2020-01-23: Everything Is Awesome


Frasers Centrepoint Trust - Everything Is Awesome

  • FRASERS CENTREPOINT TRUST (SGX:J69U)'s 1Q20 porfolio reversions was a positive 5%.
  • Anchor asset Causeway Point to lead further improvements in portfolio metrices following the opening of Thomson-East Coast Line and completion of an underground link way.
  • DPU marginally below our full year estimates of 12.78 Scts, but we believe that the next three quarters will play sufficient catch-up.

What's New

Underlying revenue growth strong across most malls; 1Q20 DPU rose 1.3% y-o-y

  • Gross revenue rose 1.0% on a y-o-y basis to S$49.8m. All malls across Frasers Centrepoint Trust’s portfolio brought in higher gross revenue y-o-y with the exception of Causeway Point and Anchorpoint.
  • Causeway Point saw operational disruptions due to AEI works that was completed year end 2019. The construction of the underground pedestrian link, that will link Causeway Point to Woods Square, is not expected to affect operations as it is outside of Causeway Point’s jurisdiction.
  • Anchorpoint saw lower average occupancy due to the fitting out of an incoming anchor tenant (Mr DIY). Mr DIY has commenced operations and is currently occupying the basement retail space that was previously held by Cold Storage.
  • Rest of the portfolio mall saw a general increase of revenue in the range of 1.3% and 4.2%, with the exception of Bedok Point, which saw a 15.1% improvement in revenue.
  • NPI rose 2.6% y-o-y to S$36.3m on the back of an improvement in NPI margins for the quarter by 1.2 ppts to 73.0%. This was led by a decline in property expenses that was 3.3% lower y-o-y.
  • The expense savings was mainly due to lower marketing expenses on a comparative basis with the opening ceremony for Northpoint City North Wing post-AEI and lower administration, utilities expenses and one-off property tax refund at Anchorpoint.
  • Total distributable income and DPU for 1QFY20 of S$35.0m and 3.06 Scts came in marginally below our full year estimates of S$143m and 12.78 Scts. However, we note that the first quarter is usually a softer quarter for Frasers Centrepoint Trust.

Portfolio metrices to further improve in the coming quarters.

  • Portfolio occupancy improved 0.8% q-o-q to 97.3%, with all malls remaining largely stable.
  • Anchorpoint saw a hike in occupancy from 79% last quarter to 93.5% with the renewal of 7 leases, which represented 22.6% of the mall’s NLA, attributable to the new anchor tenant lease with Mr DIY.
  • Overall rental reversions was a positive 5.0%, supported by the renewal of a few big leases at Causeway Point at +7.1%.
  • Underground pedestrian link within Causeway Point, which will link the mall to Woods Square will be completed in July 2020, bringing about further connectivity.

Greater shopper visibly at Causeway Point with the first stage of Thomson-East Coast Line opening at month end.

  • The first stage of Thomson-East Coast Line (TEL) will officially launch at the end of this month, with the opening of three TEL stations.
  • Woodlands station, where Causeway Point is situated, will be one of the main interchange stations across the TEL, alongside Bright Hill and Caldecott stations.
  • With a further 6 stations expected to commence operations this year, we think this will visibly increase shopper traffic to Causeway Point in the coming few quarters.

Gearing level and borrowing costs at healthy levels.

Derek TAN DBS Group Research | Singapore Research Team DBS Research | https://www.dbsvickers.com/ 2020-01-23
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