Frasers Centrepoint Trust - OCBC Investment 2020-11-11: Looking Forward To The Recovery


Frasers Centrepoint Trust - Looking Forward To The Recovery

  • Frasers Centrepoint Trust's 2HFY20 DPU -26.1% y-o-y.
  • Resilient operating metrics but leasing environment remains challenging.
  • Bumping up our fair value by 13% to S$2.75.

Frasers Centrepoint Trust's 2HFY20 results below our expectations

  • Frasers Centrepoint Trust (SGX:J69U)’s 2HFY20 results fell short of our expectations, but the outlook appears brighter now given
    1. positive developments on the vaccine front, and
    2. improving operating metrics observed at Frasers Centrepoint Trust’s malls.
  • Frasers Centrepoint Trust's 2HFY20 gross revenue and NPI fell 33.8% and 42.8% y-o-y to S$64.5m and S$38.6m, respectively, due largely to rental relief provided to tenants. Excluding this, NPI would have declined only 2.2% to S$66.0m. DPU fell 26.1% y-o-y to 4.372 cents.
  • For FY20, Frasers Centrepoint Trust’s NPI dipped 20.4% to S$110.9m, or -0.7% if the rental relief impact was excluded. DPU of 9.042 cents represented a decline of 25.1% and was 8.5% below our forecast.

Rental reversions stayed positive in FY20; tenants’ sales saw firm recovery

  • Frasers Centrepoint Trust’s portfolio occupancy stood at 94.9%, as at 30 Sep 2020, which was an uptick of 0.3 ppt q-o-q.
  • Rental reversions were positive for all its malls in FY20, coming in at an average of 4.2%, although this was a moderation as compared to 1HFY20 (+5.2%).
  • Looking ahead, we see some renewal risks as Frasers Centrepoint Trust has 32.6% of its total gross rental income up for renewal in FY21. Management has already completed ~20% of its FY21 lease expiries and highlighted that the leasing environment remains challenging.
  • On a positive note, Frasers Centrepoint Trust’s portfolio tenant sales saw only a slight y-o-y decline of 2.2% in Aug and 5.6% in Sep, a reflection of the importance of suburban malls and working from home trends. However, shopper traffic has only recovered to around 60-70% of pre-COVID-19 levels.

Raising Frasers Centrepoint Trust's fair value estimate to S$2.75

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-11-11
SGX Stock Analyst Report BUY UPGRADE HOLD 2.75 UP 2.440