Frasers Centrepoint Trust - Maybank Kim Eng 2021-07-23: Resilient Occupancies

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FRASERS CENTREPOINT TRUST (SGX:J69U)

Frasers Centrepoint Trust - Resilient Occupancies

Frasers Centrepoint Trust reported stable suburban retail metrics

• Frasers Centrepoint Trust (SGX:J69U)’s portfolio occupancy was resilient at 96.4% in 3Q21 (from 96.1% in 2Q21), while rental reversion was flattish, but should improve as tenant sales gain traction in FY22.
• We continue to see suburban malls leading the retail sector recovery in Singapore’s long reopening phase, with stable operating metrics for its more sizeable suburban malls portfolio underpinning DPU visibility.
• Our forecasts are unchanged, and our DDM-based target price of S$2.90 (COE: 6.2%, LTG: 2.0%) for Frasers Centrepoint Trust implies 22% total return. BUY.
• Frasers Centrepoint Trust remains one of our top S-REIT picks.

Mixed performance, low leasing risk

• Performance was mixed across its portfolio, as occupancy improved q-o-q at Northpoint City North (from 97.9% to 99.7%), Waterway Point (92.2% to 93.8%) and Tampines 1 (91.9% to 99.2%), while it dipped at Causeway Point (from 99.3% to 98.1%), and by 0.8-4.3 ppts across the remaining six smaller assets.
• Expiries in FY21 were reduced from 19.8% to 8.4% of NLA, with the remaining leases that are concentrated at Causeway Point (26.5% of total) and Hougang Mall (18.1%) supported by essential anchors. The lease expiry profile for Century Square (20.2%) reflects a timing of renewals following the more recent AEI, which completed in 2018.

Flattish rental reversions, to improve in FY22

• Frasers Centrepoint Trust's shopper to Suntec REIT (SGX:T82U)’s (at ~51%). Tenant sales, underpinned by essential trades, outpaced overall retail sales in the past year, even as it was lower at 81-94%, but ahead of Suntec REIT’s ~66%.
• Rental reversion was flattish, according to management, with the trend likely to sustain into 4Q21. With new supply benign, we see reversions improving on the back of a gradual reopening, and as tenant sales gain traction from 1Q22.

Sound balance sheet, further capital recycling

• Frasers Centrepoint Trust's leverage improved eight (of ten) occupying footprints in excess of 150k sf NLAs.
• See
  • Frasers Centrepoint Trust's Share Price,
  • Frasers Centrepoint Trust's Target Price,
  • Frasers Centrepoint Trust's Analyst Reports,
  • Frasers Centrepoint Trust's Dividend History,
  • Frasers Centrepoint Trust's Announcements,
  • Frasers Centrepoint Trust's Latest News.
• We think that further asset recycling is likely, especially as management looks towards increasing yield on its larger malls.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-07-23

SGX Stock Analyst Report BUY MAINTAIN BUY 2.900 SAME 2.900