FRASERS CENTREPOINT TRUST (SGX:J69U)
Frasers Centrepoint Trust - Size Matters
Stable occupancy, mall performance a mixed bag
- Frasers Centrepoint Trust's retail occupancy was stable at 96.1%, versus 96.4% in 1Q21, with better improvements at Changi City Point (from 90.7% to 94.7%), Century Square (94.1% to 96.4%) and Hougang Mall (95.6% to 99.3%) from new tenancies. These helped offset the weaker performance at Waterway Point (98.1% to 92.2%) and Tampines 1 (94.2% to 91.9%) as their anchor tenants exited.
- Frasers Centrepoint Trust's expiring leases in FY21 eased to 20.0% (from 28.3% in 1Q21) with half of leases renewed, and are mostly concentrated at Tampines 1 (~25% of its NLA), Century Square (~47%) and Hougang Mall (c.49%).
Recovery gaining traction, rents to bottom out
- Shopper traffic has continued to lag tenant sales, which have recovered to near pre-COVID levels. Rental reversion was at -0.7% (or otherwise +2.9%, if based previously on the difference of average rental rates between the new and preceding lease on same retail space).
- Frasers Centrepoint Trust's management sees limited impact with the adoption of the Code of Conduct (which sets out guidelines for negotiation of lease agreements) from 1 Jun.
- We see rent reversions improving on the back of tenant sales traction in 2H21.
AUM up, catalyst from capital recycling
- The Asia Retail Fund (ARF) deal has helped to double Frasers Centrepoint Trust's AUM to S$6.4b. The quarter saw active asset recycling with completion of the S$110m Anchorpoint sale and announcement to divest Yew Tee Point for S$220m at 10% above valuation, set to be completed by 28 May.
- Frasers Centrepoint Trust's leverage fell q-o-q from 37.7% to 35.2%, as cost of debt eased from 2.20% to 2.16%. Further asset recycling is likely, as management looks towards increasing yield on its larger malls.
Maintain BUY
- Frasers Centrepoint Trust (SGX:J69U)’s 1H21 DPU jumped 28.4% y-o-y following the Asia Retail Fund (ARF) acquisition on 27 Oct 2020, and on the back of stable portfolio occupancy. While rental reversion was soft at -0.7%, declines look set to moderate into 2H21, as tenant sales gain traction.
- We continue to see suburban malls leading the retail sector recovery in Singapore’s long reopening phase, with resilient operating metrics for its more sizeable suburban malls portfolio strengthening DPU visibility.
- 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.
- Our forecasts are unchanged, and Frasers Centrepoint Trust remains one of our top S-REIT picks. Our DDM-based target price of S$2.90 (COE: 6.2%, LTG: 2.0%) implies 23% total return. BUY.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-04-26
SGX Stock
Analyst Report
2.900
SAME
2.900
