UOBKayhian on 2 June 2014
FY14F DPU (S$ cent): 11.1
FY15F DPU (S$ cent): 11.3
Financing has been secured for the Changi City Point (CCP) acquisition with a private
placement of 88m new units at a tight 2.5% discount to VWAP to raise S$161.5m in
equity. With a 52/48 debt/equity mix, the acquisition is expected to raise forward DPU
by 1.8-2.7%, while gearing remains conservative at 30.2%. Watch for further uplift as
the mall transitions away from outlet stores with rentals expected to rise 10-15% in the
first lease cycle. Maintain BUY on FCT with a higher DDM-derived target price of
S$2.21 (from S$2.15).
Private placement of 88m new units to raise S$161.5m. Frasers Centrepoint Trust
(FCT) has completed a private placement of 88m (10.7%) new units at an issue price of
S$1.835 per unit to raise gross proceeds of S$161.5m. Lead managers and
underwriters are DBS Bank and Citigroup. Frasers Centrepoint Limited has undertaken
to subscribe for 36.2m units at the issue price.
Issue price at 2.5% discount to adjusted VWAP of S$1.8816 on 29 May. This is at the
top end of the indicative range of S$1.79-1.835 and reflects strong demand with the
placement of 51.8m units four times subscribed from new and existing Asian and
European institutional investors. Estimated advanced distribution of 2.288 S cents for
the period from 1 April to 9 June for existing unitholders. New unitholders will not be
entitled to the advanced distribution. Books closure for the advanced distribution is 9
June. Proceeds to partially fund the S$312.5m acquisition of Changi City Point with the
new equity accounting for 52% of the acquisition cost and the remainder to be funded
by debt.
Maintain BUY with a higher target price of S$2.21 (from S$2.15) based on DDM
(required rate of return: 6.8%, terminal growth: 1.8%). We raise our FY14-16F DPU
estimates by 0.9% to 2.7% after factoring in the acquisition of Changi City Point offset
by the additional equity and debt financing required.
Showing posts with label FCT. Show all posts
Showing posts with label FCT. Show all posts
Monday, 2 June 2014
Thursday, 24 January 2013
Frasers Centrepoint Trust
OCBC on 24 Jan 2013
Frasers Centrepoint Trust (FCT) reported DPU of 2.40 S cents for 1QFY13, representing a YoY growth of 9.1%. This is largely in line with expectations, given that the quarterly DPU met 22% of both our and consensus FY13F DPU estimates. Causeway Point (CWP) and Northpoint remained the key drivers for the quarter, generating 12.3% and 6.7% YoY increase in NPI. Operationally, we note the overall portfolio occupancy improved from 93.6% in prior quarter to 97.2%. This was boosted by an 8.7ppt QoQ improvement in occupancy at CWP to 96.4% following the completion of its AEI. Management revealed that several new tenants are still in the process of fitting out at CWP and expects the occupancy to trend up further when more tenants commence their operations from Jan onwards. FCT currently boasts a strong aggregate leverage of circa 30.9% and extended debt maturity of 3.6 years following the recent issue of S$70m MTN. This is likely to put it in good stead to take any attractive acquisition opportunities as they arise. Maintain BUY with an unchanged fair value of S$2.13 on FCT.
Continued growth in 1QFY13
Frasers Centrepoint Trust (FCT) reported 1QFY13 NPI of S$27.1m and distributable income of S$21.8m, up 9.1% and 10.8% YoY respectively. Of the available distributable income, we note that S$2.1m will be retained this quarter, as opposed to S$1.6m in 1QFY12. As such, DPU for the quarter came in at 2.40 S cents, representing a YoY growth of 9.1%. This is largely in line with expectations, given that the quarterly DPU met 22% of both our and consensus FY13F DPU estimates.
Operating indicators largely positive
All the five malls within FCT’s portfolio registered healthy growth in income during the quarter. However, Causeway Point (CWP) and Northpoint remained the key drivers, generating 12.3% and 6.7% YoY increase in NPI. Operationally, we note the overall portfolio occupancy improved from 93.6% in prior quarter to 97.2%. This was boosted by an 8.7ppt QoQ improvement in occupancy at CWP to 96.4% following the completion of its AEI, which cushioned the temporary weakness at Bedok Point amid a reconfiguration of its layout. Overall, a total of 62,341 sqft of NLA (7.1% of portfolio NLA) was renewed at an average positive rental reversion of 5.2% in 1Q (4QFY12: 8.9%). Management also revealed that several new tenants are still in the process of fitting out at CWP and expects the occupancy to trend up further when more tenants commence their operations from Jan onwards.
Maintain BUY
On the acquisition front, we understand that Changi City Point remains a feasible pipeline asset, but the regulatory procedures for the strata division into its retail, business park and hospitality components is a lengthy process. FCT currently boasts a strong aggregate leverage of circa 30.9% and extended debt maturity of 3.6 years following the recent issue of S$70m MTN. This is likely to put it in good stead to take any attractive acquisition opportunities as they arise. Maintain BUY with an unchanged fair value of S$2.13 on FCT.
Frasers Centrepoint Trust (FCT) reported 1QFY13 NPI of S$27.1m and distributable income of S$21.8m, up 9.1% and 10.8% YoY respectively. Of the available distributable income, we note that S$2.1m will be retained this quarter, as opposed to S$1.6m in 1QFY12. As such, DPU for the quarter came in at 2.40 S cents, representing a YoY growth of 9.1%. This is largely in line with expectations, given that the quarterly DPU met 22% of both our and consensus FY13F DPU estimates.
Operating indicators largely positive
All the five malls within FCT’s portfolio registered healthy growth in income during the quarter. However, Causeway Point (CWP) and Northpoint remained the key drivers, generating 12.3% and 6.7% YoY increase in NPI. Operationally, we note the overall portfolio occupancy improved from 93.6% in prior quarter to 97.2%. This was boosted by an 8.7ppt QoQ improvement in occupancy at CWP to 96.4% following the completion of its AEI, which cushioned the temporary weakness at Bedok Point amid a reconfiguration of its layout. Overall, a total of 62,341 sqft of NLA (7.1% of portfolio NLA) was renewed at an average positive rental reversion of 5.2% in 1Q (4QFY12: 8.9%). Management also revealed that several new tenants are still in the process of fitting out at CWP and expects the occupancy to trend up further when more tenants commence their operations from Jan onwards.
Maintain BUY
On the acquisition front, we understand that Changi City Point remains a feasible pipeline asset, but the regulatory procedures for the strata division into its retail, business park and hospitality components is a lengthy process. FCT currently boasts a strong aggregate leverage of circa 30.9% and extended debt maturity of 3.6 years following the recent issue of S$70m MTN. This is likely to put it in good stead to take any attractive acquisition opportunities as they arise. Maintain BUY with an unchanged fair value of S$2.13 on FCT.
Monday, 10 September 2012
Frasers Commercial Trust
OCBC on 7 Sept 2012
Frasers Commercial Trust (FCOT) announced that it has not exercised its right to redeem the Series A Convertible Perpetual Preferred Units (CPPUs). However, CPPU holders had successfully exercised their right to convert ~1.0m CPPUs at a conversion price of S$1.1845 per unit. We note that 878,697 new ordinary units will be issued on 1 Oct through the conversion process and ~341.5m CPPUs will be left in issue post conversion. We are currently maintaining our view that FCOT will likely redeem half of its CPPUs as the distribution rate is relatively high at 5.5% of its offer price. In view of the CPPU conversion, we now factor in the new ordinary units into our model. Our fair value, however, remains unchanged at S$1.23. Maintain BUY on FCOT.
Update on CPPU conversion and redemption
Further to the expiry of the restriction period for redemption and conversion of Series A Convertible Perpetual Preferred Units (CPPUs) on 25 Aug, Frasers Commercial Trust (FCOT) announced that it has not exercised its right to redeem the CPPUs. However, CPPU holders had successfully exercised their right to convert ~1.0m CPPUs at a conversion price of S$1.1845 per unit. We understand that 878,697 new ordinary units will be issued on 1 Oct through the conversion process (0.14% of total units outstanding as at 30 Jun), but they will not be entitled to any distributions on FCOT’s ordinary units declared during the period between 1 Apr and 30 Sep. We estimate that ~341.5m CPPUs will be left in issue post conversion.
KeyPoint sale proceeds likely used to redeem CPPUs
We are currently maintaining our view that FCOT will likely redeem half of its CPPUs as the distribution rate is relatively high at 5.5% of its offer price. The divestment of KeyPoint is expected to be completed by 8 Oct, and will provide FCOT the financial resources to redeem the CPPUs as well as pare down its existing borrowings. As a reference, FCOT had proposed on 24 Apr to sell KeyPoint for a consideration of S$360m, representing a 26.3% premium to its latest valuation of S$285m. This is expected to result in a gain of S$72.8m.
Maintain BUY with unchanged fair value of S$1.23
In view of the CPPU conversion, we now factor in the new ordinary units into our model. Our fair value, however, remains unchanged at S$1.23. We continue to like FCOT for its growth potential, strong execution and attractive P/B of 0.88x. Based on our understanding, FCOT may possibly be in the final stages of discussion with potential tenants to take up most of the remaining 85% space formerly occupied by Marsh & McLennan at China Square Central. This, together with potential interest savings, may likely translate to better financial performance at FCOT’s portfolio going forward. Maintain BUY.
Frasers Commercial Trust (FCOT) announced that it has not exercised its right to redeem the Series A Convertible Perpetual Preferred Units (CPPUs). However, CPPU holders had successfully exercised their right to convert ~1.0m CPPUs at a conversion price of S$1.1845 per unit. We note that 878,697 new ordinary units will be issued on 1 Oct through the conversion process and ~341.5m CPPUs will be left in issue post conversion. We are currently maintaining our view that FCOT will likely redeem half of its CPPUs as the distribution rate is relatively high at 5.5% of its offer price. In view of the CPPU conversion, we now factor in the new ordinary units into our model. Our fair value, however, remains unchanged at S$1.23. Maintain BUY on FCOT.
Update on CPPU conversion and redemption
Further to the expiry of the restriction period for redemption and conversion of Series A Convertible Perpetual Preferred Units (CPPUs) on 25 Aug, Frasers Commercial Trust (FCOT) announced that it has not exercised its right to redeem the CPPUs. However, CPPU holders had successfully exercised their right to convert ~1.0m CPPUs at a conversion price of S$1.1845 per unit. We understand that 878,697 new ordinary units will be issued on 1 Oct through the conversion process (0.14% of total units outstanding as at 30 Jun), but they will not be entitled to any distributions on FCOT’s ordinary units declared during the period between 1 Apr and 30 Sep. We estimate that ~341.5m CPPUs will be left in issue post conversion.
KeyPoint sale proceeds likely used to redeem CPPUs
We are currently maintaining our view that FCOT will likely redeem half of its CPPUs as the distribution rate is relatively high at 5.5% of its offer price. The divestment of KeyPoint is expected to be completed by 8 Oct, and will provide FCOT the financial resources to redeem the CPPUs as well as pare down its existing borrowings. As a reference, FCOT had proposed on 24 Apr to sell KeyPoint for a consideration of S$360m, representing a 26.3% premium to its latest valuation of S$285m. This is expected to result in a gain of S$72.8m.
Maintain BUY with unchanged fair value of S$1.23
In view of the CPPU conversion, we now factor in the new ordinary units into our model. Our fair value, however, remains unchanged at S$1.23. We continue to like FCOT for its growth potential, strong execution and attractive P/B of 0.88x. Based on our understanding, FCOT may possibly be in the final stages of discussion with potential tenants to take up most of the remaining 85% space formerly occupied by Marsh & McLennan at China Square Central. This, together with potential interest savings, may likely translate to better financial performance at FCOT’s portfolio going forward. Maintain BUY.
Wednesday, 21 March 2012
Office Reit
OCBC on 21 Mar 2012
Over 2H11, we saw office rents peak as Grade A rents declined 0.5% QoQ in 4Q11 while Grade B rents fell by 0.4%. We expect further rental dips in FY12 and believe, from our channel checks, that Grade A rents has already fallen 3-5% QoQ in 1Q12. Going forward, we think office capital values could come under pressure with declining rentals, accompanied by cap rate expansion, as major players re-evaluate the office cycle. In general, while the downside from current levels of distributable income is likely capped as we enter a phase of renewing leases signed over the previous trough (2H09-2H10), we see key risks to share prices stemming from fair value write-downs should capital values ease significantly. That said, this is mostly balanced out by currently undemanding valuations (sector average PB: 0.7x) and relatively robust balance sheets (sector average gearing: 35%). Maintain NEUTRAL on the office REITS. Downgrade CCT to HOLD (FV: S$1.14); maintain HOLD on Suntec (FV: S$1.10). Our top pick is FCOT (BUY, FV: S$0.94)
Office rentals peaked in 2H11
Over 2H11, we saw office rents peak as Grade A rents declined 0.5% QoQ in 4Q11 while Grade
B rents fell by 0.4%. Vacancy rates also increased – Grade A vacancies came up from 10.9% (3Q11) to 11.6% (4Q11); CBD vacancies from 7.7% to 8.8%. We also judge pre-leasing activity at major new buildings to be somewhat sluggish (One Raffles Place - 42% pre-committed, MBFC T3 - 62%).
Too early to call office bottom
We expect further rental dips in FY12 and believe, from our channel checks, that Grade A rents has already fallen 3-5% QoQ in 1Q12. Given continued macroeconomic uncertainties and an ample office pipeline of 4.2m sqft NLA in FY12-13, we now forecast office rentals to fall 10-15% in FY12 and believe that it is too early to call a bottom for rentals at this juncture.
Office capital values to come under pressure
Going forward, we think office capital values could come under pressure with softening rentals expectations, accompanied by cap rates expansion, as major players re-evaluate the office cycle. Major office transactions have been limited year to date, with CCT’s purchase of 20 Anson at S$430m (S$2.1k psf) in Feb 12 as the first sizable transaction. We also note that Robinson Point is reportedly on the market for about S$306m (S$2.3k psf). In our view, the transaction price for this asset, if sold, could be a touchstone for office capital values ahead, particularly if put against Robinson Centre next door which sold for S$2.2k psf (S$293m) only in Oct 11.
Maintain NEUTRAL on office REITS
In general, while the downside from current levels of distributable income is likely capped as we enter a phase of renewing leases signed during the previous trough (2H09-2H10), we see the key risk to share prices stemming from fair value write-downs should capital values ease significantly. That said, this is mostly balanced out by currently undemanding valuations (sector average PB: 0.7x) and relatively robust balance sheets (sector average gearing: 35%). Maintain NEUTRAL on the office REITS. Downgrade CCT to HOLD (FV: S$1.14); maintain HOLD on Suntec (FV: S$1.10). Our top pick is FCOT (BUY, FV: S$0.94) due to its diversified regional exposure and attractive valuation (0.4x PB; 7.9% FY12 yield).
Over 2H11, we saw office rents peak as Grade A rents declined 0.5% QoQ in 4Q11 while Grade
B rents fell by 0.4%. Vacancy rates also increased – Grade A vacancies came up from 10.9% (3Q11) to 11.6% (4Q11); CBD vacancies from 7.7% to 8.8%. We also judge pre-leasing activity at major new buildings to be somewhat sluggish (One Raffles Place - 42% pre-committed, MBFC T3 - 62%).
Too early to call office bottom
We expect further rental dips in FY12 and believe, from our channel checks, that Grade A rents has already fallen 3-5% QoQ in 1Q12. Given continued macroeconomic uncertainties and an ample office pipeline of 4.2m sqft NLA in FY12-13, we now forecast office rentals to fall 10-15% in FY12 and believe that it is too early to call a bottom for rentals at this juncture.
Office capital values to come under pressure
Going forward, we think office capital values could come under pressure with softening rentals expectations, accompanied by cap rates expansion, as major players re-evaluate the office cycle. Major office transactions have been limited year to date, with CCT’s purchase of 20 Anson at S$430m (S$2.1k psf) in Feb 12 as the first sizable transaction. We also note that Robinson Point is reportedly on the market for about S$306m (S$2.3k psf). In our view, the transaction price for this asset, if sold, could be a touchstone for office capital values ahead, particularly if put against Robinson Centre next door which sold for S$2.2k psf (S$293m) only in Oct 11.
Maintain NEUTRAL on office REITS
In general, while the downside from current levels of distributable income is likely capped as we enter a phase of renewing leases signed during the previous trough (2H09-2H10), we see the key risk to share prices stemming from fair value write-downs should capital values ease significantly. That said, this is mostly balanced out by currently undemanding valuations (sector average PB: 0.7x) and relatively robust balance sheets (sector average gearing: 35%). Maintain NEUTRAL on the office REITS. Downgrade CCT to HOLD (FV: S$1.14); maintain HOLD on Suntec (FV: S$1.10). Our top pick is FCOT (BUY, FV: S$0.94) due to its diversified regional exposure and attractive valuation (0.4x PB; 7.9% FY12 yield).
Thursday, 2 February 2012
Frasers Commercial Trust
OCBC on 2 Feb 2012
Frasers Commercial Trust’s (FCOT) 1QFY12 DPU of 1.51 S cents is consistent with both consensus and our estimates, forming 24.3% of consensus/our full-year DPU projection. Looking ahead, we believe FCOT performance is likely to remain robust. We understand that FCOT will be taking over the management of China Square Central upon the expiry of the master lease on 29 Mar. We believe FCOT is able to negotiate better rental terms with the underlying tenants. We also see potential for it to benefit from the low interest rate environment, as management actively seeks early refinancing for its borrowings. Maintain BUY with unchanged fair value estimate of S$0.87.
Results were in line with expectations. Frasers Commercial Trust (FCOT) reported a strong set of 1QFY12 results last evening. NPI and distributable income grew by a respective 7.4% and 21.7% YoY to S$24.6m and S$9.6m, driven chiefly by improved occupancy and rental rates at Central Park, Australia (29.7% growth in NPI). This more than offset lower income contribution from 55 Market Street (-6.0%). As a result, DPU for the quarter came in at 1.51 S cents, representing a 20.8% YoY growth after adjusting for unit consolidation done in Feb 2011. This is consistent with both consensus and our estimates, forming 24.3% of consensus/our full-year DPU projection of 6.2 S cents.
Operationally sound. Operationally, we note that FCOT performance has also been stable. The portfolio’s average occupancy rate remained high at 97.6% (98.0% in prior quarter), while the weighted average lease to expiry was still healthy at 3.4 years (3.6 years previously). Singapore’s KeyPoint continued to keep its growth momentum since its trough occupancy level of 66.2% in 2QFY09, reaching a high of 90.2% in the quarter (1.8ppt QoQ rise). In Australia, management also revealed that three new leases at Central Park were secured and were due to commence in Jan and Apr 2012. This is likely to raise the property’s occupancy rate to 99.8% from 96.5%.
Performance likely to remain robust. In the coming quarter, FCOT will be taking over the management of China Square Central upon the expiry of the master lease on 29 Mar. We believe FCOT is able to negotiate better rental terms with the underlying tenants. As at 31 Dec, its leverage remained largely unchanged at 36.8%, with an average borrowing rate of 4.2%. With management’s proactive approach to undertake early refinancing for its borrowings, there is potential for FCOT to benefit from the low interest rate environment. Maintain BUY with unchanged fair value estimate of S$0.87.
Operationally sound. Operationally, we note that FCOT performance has also been stable. The portfolio’s average occupancy rate remained high at 97.6% (98.0% in prior quarter), while the weighted average lease to expiry was still healthy at 3.4 years (3.6 years previously). Singapore’s KeyPoint continued to keep its growth momentum since its trough occupancy level of 66.2% in 2QFY09, reaching a high of 90.2% in the quarter (1.8ppt QoQ rise). In Australia, management also revealed that three new leases at Central Park were secured and were due to commence in Jan and Apr 2012. This is likely to raise the property’s occupancy rate to 99.8% from 96.5%.
Performance likely to remain robust. In the coming quarter, FCOT will be taking over the management of China Square Central upon the expiry of the master lease on 29 Mar. We believe FCOT is able to negotiate better rental terms with the underlying tenants. As at 31 Dec, its leverage remained largely unchanged at 36.8%, with an average borrowing rate of 4.2%. With management’s proactive approach to undertake early refinancing for its borrowings, there is potential for FCOT to benefit from the low interest rate environment. Maintain BUY with unchanged fair value estimate of S$0.87.
Wednesday, 25 January 2012
FCT
OCBC Research on 20 Jan 2012
Frasers Centrepoint Trust (FCT) reported NPI of S$24.9m and DPU of 2.2 S cents, in line with our estimates. Going forward, FCT believes that its portfolio performance is expected to remain stable, with positive growth in overall rental reversions likely in the coming months. While Causeway Point (CWP) occupancy is projected to dip slightly from 95.5% to 90% during this phase of work, the impact to rental income is likely to be limited in our view, since it involves mainly the higher levels and mall’s facade. We continue to like FCT for its pure exposure to suburban malls and its growth potential. With the impending completion of the asset enhancement initiatives at CWP, we believe FCT may be more active in seeking investment opportunities to drive growth, possibly asset injection from pipeline or third-party assets. Maintain BUY with unchanged S$1.68 fair value on FCT.
Sturdy results as expected. Frasers Centrepoint Trust (FCT) reported NPI of S$24.9m (+33.6% YoY) and distributable income of S$19.7m (+31.3% YoY) for 1QFY12, supported by strong uplift from Causeway Point (CWP), full-quarter contribution from Bedok Point and positive rental reversions. The results were consistent with our estimates, with headline numbers forming 23.5-26.7% of our full-year forecasts. We note that ~S$1.6m (c.0.2 S cents) will temporarily be retained, resulting in a quarterly DPU of 2.2 S cents (+12.8% YoY). This will be paid on 29 Feb 2012, together with DPU of 0.28 S cents announced in Oct 2011.
Demand for malls still strong. Except for Bedok Point whose occupancy was unchanged at 98.3%, all four other malls in FCT’s portfolio continued to register improvements in their occupancies over the quarter. This brought the overall portfolio occupancy to 97.5%, up from 95.1% in prior quarter. In addition, positive rental reversions of 9.3-11.2% (average 9.6% vs. 7.9% in 4QFY11) were seen across its portfolio properties, reflecting still healthy demand for its malls.
Maintain BUY. Going forward, FCT believes that its portfolio performance is expected to remain stable, with positive growth in overall rental reversions likely in the coming months. Management also guided that the refurbishment works at CWP, now 80% completed, is on track for full completion by Dec 2012. While occupancy is projected to dip slightly from 95.5% to 90% during this phase of work, the impact to rental income is likely to be limited in our view, since it involves mainly the higher levels and mall’s facade. We continue to like FCT for its pure exposure to suburban malls and its growth potential. With the impending completion of the asset enhancement initiatives at CWP, we believe FCT may be more active in seeking investment opportunities to drive growth, possibly asset injection from pipeline or third-party assets. Maintain BUY with unchanged S$1.68 fair value on FCT.
Demand for malls still strong. Except for Bedok Point whose occupancy was unchanged at 98.3%, all four other malls in FCT’s portfolio continued to register improvements in their occupancies over the quarter. This brought the overall portfolio occupancy to 97.5%, up from 95.1% in prior quarter. In addition, positive rental reversions of 9.3-11.2% (average 9.6% vs. 7.9% in 4QFY11) were seen across its portfolio properties, reflecting still healthy demand for its malls.
Maintain BUY. Going forward, FCT believes that its portfolio performance is expected to remain stable, with positive growth in overall rental reversions likely in the coming months. Management also guided that the refurbishment works at CWP, now 80% completed, is on track for full completion by Dec 2012. While occupancy is projected to dip slightly from 95.5% to 90% during this phase of work, the impact to rental income is likely to be limited in our view, since it involves mainly the higher levels and mall’s facade. We continue to like FCT for its pure exposure to suburban malls and its growth potential. With the impending completion of the asset enhancement initiatives at CWP, we believe FCT may be more active in seeking investment opportunities to drive growth, possibly asset injection from pipeline or third-party assets. Maintain BUY with unchanged S$1.68 fair value on FCT.
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