FRASERS CENTREPOINT TRUST (SGX:J69U)
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
- Frasers Centrepoint Trust completed the acquisition of ARF, which doubled its AUM to S$6.7b. The quarter also saw active asset recycling with the divestments of Bedok Point at S$108m to its sponsor for redevelopment, and Anchorpoint at S$110m to unrelated third parties. The latter is expected to be completed by end-Mar 2021.
- 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.
- Frasers Centrepoint Trust's leverage rose q-o-q from 35.9% to 37.7% from the ARF transaction, but the cost of debt has eased 20bps to 2.2%. We estimate debt headroom at S$1.4b (at 50% limit).
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-01-25
SGX Stock
Analyst Report
2.900
SAME
2.900
