Frasers Centrepoint Trust - Maybank Kim Eng 2021-01-25: Adding To Resilient Space


Frasers Centrepoint Trust - Adding To Resilient Space

Resilient occupancies; maintain BUY

  • Frasers Centrepoint Trust (SGX:J69U)’s occupancy for its enlarged portfolio was resilient at 96.4% in 1Q21, following the ARF acquisition, with broad-based and better-than-expected improvement across its malls.
  • Stable operating metrics suggests suburban malls will lead the retail sector recovery in Singapore’s phase 3 reopening. While shopper traffic stays at ~30% below pre-COVID levels, tenant sales recovery has gained traction and strengthened DPU visibility.
  • Our forecasts are unchanged. The ARF properties have reinforced its market share in the more resilient suburban malls space. Our DDM-based target price for Frasers Centrepoint Trust stays at S$2.90 (COE: 6.2%, LTG: 2.0%). Reiterate BUY.

Occupancies improved, led by largest malls

  • Excluding the ARF portfolio acquired recently, occupancies improved q-o-q across all malls with the exception of Yew Tee Point, which fell from 97.1% to 95.6%. There was stronger performance at Causeway Point (96.6% to 97.8%), Northpoint City North Wing (95.0% to 98.7%), and Waterway Point (96.0% to 98.1%).
  • Frasers Centrepoint Trust's expiring leases in FY21 were lowered from 31.5% to 28.3% with a quarter of leases renewed. The remaining leases are concentrated at Hougang Mall (supported by its anchors), Century Square (after its recent AEI), and Tampines 1 (challenging given positioning against competition).

Recovery underway, with a further lift in Phase 3

  • Shopper traffic remained at ~60-70% of pre-COVID levels, and similar to CapitaLand Integrated Commercial Trust (SGX:C38U)’s retail shopper traffic, which had recovered to 68% for its suburban malls. Tenant sales have returned to just -1.3% pre-COVID levels and similar to that of CapitaLand Integrated Commercial Trust’s suburban portfolio. They were driven by the household, supermarket, healthcare and jewellery & watches categories.
  • Rental reversion was flat, but we expect lease negotiations to be more protracted and for reversions to be neutral or slightly negative in FY21.

AUM up, balance sheet sound

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-01-25
SGX Stock Analyst Report BUY MAINTAIN BUY 2.900 SAME 2.900