Frasers Centrepoint Trust

Frasers Centrepoint Trust 2QFY14 results were in line, with distributable income of $23.8m (+7%), and DPU at 2.9¢ (+6.7% y/y), taking 1H14 DPU to 5.38¢ (+5.5%). Gross revenue and net property income rose 2.9% and 2.0% to $41.0m and $29.3m respectively, mainly attributed to higher revenue contribution from Causeway Point during the quarter. Bedok Point however continued to be the weak spot, with occupancy rate falling to 77% from 80% in the previous quarter, due to the mall undergoing fitting-out works for incoming new tenants. Management expects Bedok Point’s occupancy rate to recover to above 95% in 2H14 upon the lease commencement of the new tenants. Overall, FCT’s portfolio occupancy as at 31 Mar ‘14 stood at 96.8%, compared to 96.7% in the preceding quarter, while the entire portfolio average rental renewals in 2Q14 registered a 9.3% increase over the preceding leases contracted 3 years ago. Aggregate leverage remained comfortable at 27.7% and a weighted average debt maturity of 2.72 years. Performance of FCT’s portfolio is expected to remain stable with the next growth catalyst likely to come from the recent proposed acquisition of Changi City Point for $305m. This will be the sixth mall in FCT’s portfolio and will strengthen FCT’s ability to continue to deliver good and stable distribution returns to its unitholders. At the current price, FCT trades at an annualized FY14 forecast yield of 6.4% and 0.93x P/B versus the retail REIT average of 6.5% forward yield and 0.98x P/B. Latest broker ratings as follows: CIMB maintains Add with TP $2.19 CLSA maintains O/p with TP $2.00 HSBC maintains O/w with TP $1.95