Frasers Centrepoint Trust

DMG & PARTNERS RESEARCH on 24 Oct 2012

Q4 FY2012 DPU better than expected. Frasers Centrepoint Trust (FCT) reported a Q4 FY2012 DPU of 2.71 cents (+15.3 per cent y-o-y). Together with the dividend distributed in the first Q3 of FY2012, total DPU came in at 10.01 cents (+20.3 per cent y-o-y), outperforming our FY2012 DPU forecasts by 5.4 per cent. Revenue for Q4 FY2012 grew to $39.0 million (+14.3 per cent y-o-y) while net property income rose to $28.7 million (+13.7 per cent y-o-y).

These strong growths are mainly attributed to strong contributions from Causeway Point (CWP), full-year contributions from Bedok Point and positive growth in all other malls. Going forward, we expect FCT to continue to register stronger numbers on the back of increased contributions from CWP as average occupancy and rental rates continue to pick up from its lows during the initial stage of AEI and positive rental reversions in suburban malls to continue.

Given FCT's defensive portfolio, potential to acquire Changi CityPoint in FY2013 coupled with the continual interest in high dividend plays amid a strong Singapore dollar and a prolonged low interest rate environment, we maintain "buy" call on FCT with an upward revision in our dividend discount model-based TP of $2.10.

Positive growth from CWP and Bedok Point. Going forward, we expect market confidence for rental rates in suburban malls to remain intact as we step into the fourth quarter, which is traditionally a peak season for retail due to year-end festivities. Additionally, we expect FCT's DPU to continue to grow on the back of additional contributions from both CWP and Bedok Point. Currently, works at CWP are on track for full completion by December 2012, while Bedok Point continues to grow strongly, contributing $12.5 million to the group's FY2012 revenue.

Current market conditions beneficial to FCT share price. In view of a volatile global market, the Singapore government 10-year bond has fallen to 1.33 per cent from 1.75 per cent since March as investors continue to view Singapore bonds as a safe investment haven. Going forward, as the global market continues to be plagued by uncertainty, we believe FCT, which is viewed as highly defensive, will continue to be appealing on the back of high liquidity, prolonged low interest rate environment and a strong Singapore currency.

Maintain 'buy' with revised TP to $2.10. As the outlook for suburban malls remains strong, together with respectable DPU growth for the rest of the year, we continue to maintain our "buy" rating with an upward revision in TP to $2.10.
BUY