Frasers Centrepoint Trust - Maybank Kim Eng 2020-11-03: Suburban Strength


Frasers Centrepoint Trust - Suburban Strength

Raising DPU forecast & Target price

  • We raised Frasers Centrepoint Trust (SGX:J69U)'s FY21-22 DPUs by 4-6% with consolidation of its Asia Retail Fund (ARF) assets from 27 Oct, and Bedok Point divestment. The transactions, backed by S$1.3b in new equity, has raised AUM by 68% to S$6.7b and reinforced its market share in the more resilient suburban malls space.
  • Frasers Centrepoint Trust's FY20 DPU at -25.1% y-o-y were a slight miss (to consensus and MKE) due to rental rebates, but asset valuations stayed unchanged. For now, tenant sales recovery has gained traction and strengthened DPU visibility.
  • Our new DDM-based Target Price for Frasers Centrepoint Trust is S$2.90 (COE: 6.2%, LTG: 2.0%).
  • Reiterate BUY.

Occupancies improved, cushioned by largest malls

  • Excluding the impact from rental relief (S$27.4m), Frasers Centrepoint Trust's revenue and NPI would have declined by 5.7% y-o-y and 2.2% y-o-y in 1H20, and 2.4% y-o-y and 0.7% y-o-y in FY20, versus the 16-43% y-o-y fall in the headline numbers.
  • Frasers Centrepoint Trust's portfolio occupancy rose q-o-q from 94.6% to 94.9% in 4Q20, as Yew Tee Point improved from 96.0% to 97.1%, and with occupancies maintained at > 95.0% for its three largest malls. They contribute 65% of the 31.5% of leases that are due for renewal in FY21, and should cushion occupancies, given their dominance in their respective submarkets.

Recovery underway, with a further lift in Phase 3

  • Frasers Centrepoint Trust's tenant sales have returned close to pre-Covid levels, ahead of 60-70% for shopper traffic, and were led by a recovery in the household, supermarket, sports, and jewellery & watches categories.
  • We see further improvement with the easing of safe distancing measures in the Phase 3 reopening, although performances will likely vary across both trades and tenancies. Reversions were +3.6-5.6%, down from +2.8-6.5% in 1H20.
  • Management expects its lease negotiations to be more protracted and for reversions to be neutral or slightly negative in FY21.

Suburban assets resilient, valuations unchanged

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-11-03
SGX Stock Analyst Report BUY MAINTAIN BUY 2.90 UP 2.800