Frasers Centrepoint Trust - CGS-CIMB Research 2020-04-24: Reiterate ADD, With An Unchanged Target Price Of S$2.49


Frasers Centrepoint Trust - Reiterate ADD, With An Unchanged Target Price Of S$2.49

  • Frasers Centrepoint Trust's 1HFY20 DPU in line, income retained in view of uncertainties.
  • Most malls reported strong growth.
  • Recent renewed leases saw slower rental reversion.

1HFY20 DPU in line, income retained in view of uncertainties.

  • Frasers Centrepoint Trust (SGX:J69U)’s 1HFY20 revenue and NPI increased by 0.9% and 0.6% y-o-y to S$99.9m and S$72.3m, respectively. PBT and distributable income jumped by 39.2% y-o-y and 25.7% to S$74m and S$71m, respectively, due to contributions from Frasers Centrepoint Trust’s 24.8% interest in PGIM Real Estate Asia Retail Fund (PGIM ARF) and 40% interest in Waterway Point.
  • 1HFY20 DPU, however, declined 24% y-o-y to 4.67 Scts (47% of our full-year forecast) as Frasers Centrepoint Trust retained 50% of its income (or S$18m) in 2QFY20, bringing its 1HFY20 dividend payout ratio to 73.5%.
  • The retained income could cover 2.5 months of fixed operating expenses.

Most malls reported strong growth.

  • The stronger 1HFY20 revenue was driven by all its malls, except Anchor Point, which had no carpark income after the expiry of its car park management contract on 30 Nov 2019. Frasers Centrepoint Trust’s portfolio occupancy rate remained high at 96.1% in 1QFY20, vs. 97.3% as at 4QFY19.
  • The slightly lower occupancy q-o-q was mainly due to non-renewals of two tenants and pre-termination of one tenant at Changi City Point.

Recent renewed leases saw slower rental reversion.

  • Portfolio rental reversion was strong at +5.2%. Frasers Centrepoint Trust had renewed the expiring leases of all its anchor tenants due in FY20. It has less than 12% of expiring leases (by NLA) remaining to be renewed in 2H20. The small number of leases renewed in Mar 20 has seen slower rental reversions, but it was still in the positive range.
  • So far, a minimal number of tenants have put in requests to defer rental payment. Management estimates 10-15% of its tenants, at worst, would opt for rental deferment.

Shopper traffic started to decline in Feb 2020.

  • Portfolio shopper traffic turned from a positive growth in Jan 2020 to a mild negative in Feb 2020 and -9% in Mar 2020 due to the government’s multiple stricter safety distancing measures.
  • Larger malls such as Causeway Point and Waterway Point saw double-digit falls in shopper traffic in Mar, while smaller malls such as YewTee Point and Anchor Point saw mid-single digit falls. The larger decline in the larger malls was partly due to the higher base effect.
  • Overall, 2Q2020 traffic was 2.4% lower y-o-y, while YTD (Oct 19-Mar 20) traffic was +3.1% y-o-y.

Larger malls experienced a larger decline in tenant sales.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-04-24
SGX Stock Analyst Report ADD MAINTAIN ADD 2.490 SAME 2.490