Friday 19 April 2013

Frasers Centrepoint Trust

OCBC on 18 Apr 2013

Frasers Centrepoint Trust’s (FCT) 1HFY13 DPU climbed 8.5% to reach 5.1 S cents, forming ~47% of ours and consensus full-year DPU forecasts. This is broadly in line with expectations, given that the income retained in 1H is likely to be distributed in 2H. On the whole, we note that positive rental reversion of 6.6% was achieved in 1H (1Q: 5.2%, 2Q: 10.1%). Portfolio occupancy also improved to 98.2% as at 31 Mar from 87.2% in prior quarter, boosted by start of tenant operations following the fitting out at CWP and Bedok Point. This more than offset the temporary dip in occupancy rates at YewTee Point and Anchorpoint. Looking ahead, management expects CWP and Northpoint to continue to uphold the growth momentum of FCT, while the rest of the malls to remain stable. FCT also updated that the sub-division of the strata titles of the components at One@Changi City is still ongoing, and completion of the process remains uncertain. We like FCT for its strong execution, strong financial position (30.5% gearing) and suburban mall exposure, but at current price, we deem the valuation (1.45x P/B) as fair, not compelling. As such, we maintain HOLD and S$2.13 fair value on FCT.

2QFY13 results broadly in line
Frasers Centrepoint Trust (FCT) announced a firm set of 2QFY13 results yesterday. NPI and distributable income grew by 9.7% and 10.4% YoY to S$28.7m and S$23.5m respectively. DPU came in at 2.7 S cents, up by a slightly slower 8.0% due to retention of S$1.2m (0.15 S cents) in distributable income. For 1HFY13, NPI rose 9.4% YoY to S$55.9m, while distributable income increased 10.6% to S$45.3m. 1H DPU, on the other hand, climbed 8.5% to reach 5.1 S cents, forming ~47% of ours and consensus full-year DPU forecasts. This is broadly in line with expectations, given that the income retained in 1H (S$3.3m) is likely to be distributed in 2H. 

Bigger malls continued to perform
FCT’s crown jewel, Causeway Point (CWP), continued to exhibit strength post asset enhancement (AEI), with 2Q NPI growing a significant 17.4% amid higher lease commencements, turnover rents and better contracted rates. Northpoint also registered 6.0% growth in NPI on the back of positive rental reversions. Only YewTee Point and Bedok Point suffered a slight NPI decline of 3.5% and 1.1% respectively. On the whole, we note that positive rental reversion of 6.6% was achieved in 1H (1Q: 5.2%, 2Q: 10.1%). In addition, portfolio occupancy improved to 98.2% as at 31 Mar from 87.2% in prior quarter, boosted by start of tenant operations following the fitting out at CWP and Bedok Point. This more than offset the temporary dip in occupancy rates at YewTee Point and Anchorpoint. 

Maintain HOLD
Looking ahead, management expects CWP and Northpoint to continue to uphold the growth momentum of FCT, while the rest of the malls to remain stable. FCT also updated that the sub-division of the strata titles of the components at One@Changi City is still ongoing, and completion of the process remains uncertain. We like FCT for its strong execution, strong financial position (30.5% gearing) and suburban mall exposure, but at current price, we deem the valuation (1.45x P/B) as fair, not compelling. As such, we maintain HOLD and S$2.13 fair value on FCT.

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