FRASERS CENTREPOINT TRUST (SGX:J69U)
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
- Cap rates were unchanged for Frasers Centrepoint Trust's portfolio, with valuation at -0.1% y-o-y to S$2.9b, versus peers at -3-4%.
- Frasers Centrepoint Trust's leverage increased to 35.9% at end-Sep 2020 with its additional 12% interest in ARF, and should rise further to 39.3% with the completion of the ARF transaction.
- See Frasers Centrepoint Trust Share Price; Frasers Centrepoint Trust Target Price; Frasers Centrepoint Trust Analyst Reports; Frasers Centrepoint Trust Dividend History; Frasers Centrepoint Trust Announcements; Frasers Centrepoint Trust Latest News.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-11-03
SGX Stock
Analyst Report
2.90
UP
2.800
