Frasers Centrepoint Trust - OCBC Investment 2021-04-23: Recovery Continues To Gain Traction


Frasers Centrepoint Trust - Recovery Continues To Gain Traction

  • Frasers Centrepoint Trust's 1HFY21 DPU jumped 28.4% y-o-y to 5.996 cents.
  • Positive tenants’ sales growth in Jan and Feb.
  • Healthy financial position.

Frasers Centrepoint Trust's 1HFY21 results in-line with our expectations

  • Frasers Centrepoint Trust (SGX:J69U) reported its 1HFY21 results which met our expectations. Gross revenue and NPI both jumped 73.8% y-o-y to S$173.6m and S$125.7m, respectively. This was boosted largely by the five-month contribution from the malls from the AsiaRetail Fund Limited acquisition.
  • Frasers Centrepoint Trust's DPU grew 28.4% to 5.996 cents as 1HFY20 results was impacted by S$18.8m of income available for distribution that was retained. 1HFY21 DPU accounted for 47.9% of our FY21 forecast.
  • Looking ahead, with the voluntary adoption of the Code of Conduct for Leasing of Retail Premises from 1 Jun 2021, Frasers Centrepoint Trust highlighted that it does not expect any significant impact from this, and will seek ways to reduce its costs which it is not able to pass on to its tenants.

Tenants’ sales continue to recover

  • Frasers Centrepoint Trust’s tenants’ sales saw encouraging y-o-y growth 2.8%, 0.4% and 11.7% in Nov 2020 and Jan and Feb 2021, respectively. Sales in Dec was flat y-o-y. For these four months, Frasers Centrepoint Trust’s tenants’ sales outperformed the overall Singapore retail sales growth. However, footfall is still down 30-40% as compared to pre-COVID-19 levels given that people are still largely working from home, coupled with safe distancing requirements which are still in place.
  • Although portfolio rental reversions came in at -0.7% in 1HFY21, we note that this was due to a change in calculation methodology, which now compares the average rent of incoming leases with that of expiring leases. If we were to adopt Frasers Centrepoint Trust’s previous methodology, rental reversion would have been +2.9% instead.
  • Overall portfolio occupancy was 96.1%, a slight decline of 0.3 percentage points (ppt) q-o-q due largely to H&M vacating its space at Waterway Point. Management is already in advanced negotiations with a number of potential replacement tenants.

Healthy gearing ratio of 35.2%

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2021-04-23
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