FRASERS CENTREPOINT TRUST (SGX:J69U)
Frasers Centrepoint Trust - Well-Positioned For The Reopening
- Beneficiary of reopening but expect some impact from more locals travelling overseas.
- Suburban retail market continued its gradual recovery.
- Expect further actions on capital management.
Beneficiary of reopening
- We expect Frasers Centrepoint Trust (SGX:J69U) to largely benefit from Singapore’s reopening drive, although more Singaporeans travelling overseas due to pent-up demand could also dampen shopper traffic to its malls, especially during the upcoming and Jun and Dec holiday periods. However, recovery from the pandemic should continue to gain traction, in our view, as group sizes of up to 10 fully vaccinated persons are allowed to dine-in at F&B establishments with effect from 29 Mar 2022, from five persons previously.
- Furthermore, activities and events can now be held in mall atriums, except for food fairs. Although revenue from atrium spaces have historically formed only ~2-3% of Frasers Centrepoint Trust’s revenue, the increase in vibrancy will likely provide a boost to footfall for Frasers Centrepoint Trust’s malls.
Suburban retail market rents continued to improve gradually
- Based on property consultant CBRE Research’s latest 1Q22 data, suburban retail rents in Singapore rose 0.2% quarter-on-quarter to S$30.15 psf/month. This was the fourth consecutive quarter of q-o-q increase, although the pace of improvement moderated slightly from 4Q21’s 0.5% increase.
- Frasers Centrepoint Trust disclosed that its portfolio tenants’ sales formed 113% of its pre-COVID average in Jan 2022. This figure was also above 100% in Nov and Dec 2021, at 101% and 106%, respectively. Shopper traffic still lagged, coming in at 69%, 66% and 58% in Jan 2022, Dec 2021 and Nov 2021, respectively. This may improve with the increase in more employees returning to their workplaces (capacity limit increased from 50% to 75%).
Near-term buffer from higher utility costs; expecting further actions on capital management
- One of investors’ key concerns on the S-REITs sector is rising utility costs. We believe Frasers Centrepoint Trust is sheltered from this in the near-term due to contracts which have been locked in for the remainder of FY22 at least.
- From a balance sheet perspective, Frasers Centrepoint Trust hedged only 54% of its debt, as at 31 Dec 2021, but we expect further action on this front and will look out for its updated hedge ratio when it reports its upcoming 1HFY22 results.
- After adjustments, which include lowering our FY23 DPU forecast by 1.4% on lower margin assumptions and increasing our risk-free rate assumption from 1.9% to 2.5%, our fair value estimate for Frasers Centrepoint Trust dips from S$2.81 to S$2.67.
- See
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2022-04-13
SGX Stock
Analyst Report
2.67
DOWN
2.780
