Frasers Centrepoint Trust - DBS Research 2020-11-04: Back In The Groove


Frasers Centrepoint Trust - Back In The Groove

  • Frasers Centrepoint Trust's distributions to rise past pre-COVID levels with PGIM acquisition in FY21
  • Operational metrics stable; a majority of tenant trades showing promise with minimal further assistance expected
  • Phase 3 reopening to further boost tenants’ sales
  • Worst potentially over, Frasers Centrepoint Trust's target price raised to S$3.00

Top-line weakness from rental reliefs

  • Frasers Centrepoint Trust (SGX:J69U)'s gross revenue and NPI for full-year 2020 was S$164.38m (-16% y-o-y) and S$110.89m (-20.4% y-o-y) respectively.
  • Excluding the rental relief of S$27.4m provided to tenants this year, decline in revenue and NPI would have narrowed at -2.4% and -0.7% respectively, mainly due to the loss in ancillary income (i.e. car park and atrium space rental).
  • Correspondingly, Frasers Centrepoint Trust's distributable income declined 15% y-o-y to S$101.1m, while distribution for FY20 declined 25% to 9.042 cents.

Frasers Centrepoint Trust's Operational performance

  • Occupancy rate increased marginally q-o-q to c.94.9%, mainly from better take-up rates at Yew Tee Point (c.97.1%) and Waterway Point (c.96.0%) which more than offset the slight drop in occupancies at Northpoint City North Wing and Causeway Point.
  • Rental reversion for FY20 was a positive c.4.2% (average growth in rental rates between new and expiring leases) but if we compare expiring to new rental rates, this would have been flattish.

Outlook – suburban malls to continue to excel when phase 3 re-opening comes.

  • Tenant retail sales have rebounded close to pre- COVID-19 levels, contracting by only 3.0% y-o-y in 4QFY20, while shopper traffic was c.38% lower y-o-y. We understand that most retailers, except a few family karaoke and travel agencies (c.1% of revenues), have resumed business.
  • Retailers within the essential service trade, which is a majority of the tenant trades with Frasers Centrepoint Trust mall, continue to do well while its department store operator – Metro is seeing stable operational metrics.
  • We understand that c.20% of the tenants are currently seeing operational statistics at 20% below pre-COVID-19 levels and may need additional assistance. The manager is looking to assist through active marketing and promotion to boost tenant sales rather than offering further rebates.
  • The continued reopening the Singapore economy into phases 3 is positive for operating metrics. We anticipate the resumption of atrium sales and potentially bigger group sizes (from 5 pax to 8 pax) to drive consumption, especially for the food & beverage (F&B) sector.

PGIM acquisition to drive performance in FY21

Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-11-04
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