Thursday, July 23, 2015

Frasers Centrepoint Trust

Frasers Centrepoint Trust: FCT’s 3QFY15 DPU reached a record 3.04¢ (+0.5% y/y, +2.5% q/q) on distributable income of $26.9m (+15.0% y/y, -0.9%q/q). For 9M15, DPU totalled 8.75¢, meeting 74% of consensus FY15 estimate.

Gross revenue and NPI grew 14.3% and 12.8% (but declined 0.8% and 2% sequentially) to $47.1m and $32.9m respectively, primarily lifted by Changi City Point which was acquired last year and higher rental from existing malls. The only exception was Bedok Point which generated lower average rental.

Leases renewed during the quarter have helped the retail mall REIT achieve positive rental reversion of 5.3%, better than 3.8% in the prior quarter. This was supported by encouraging shopper traffic (+3.6%) and tenant sales (+2.2%) from its malls (ex Changi City Point).

Overall portfolio occupancy dipped 0.6ppt q/q to 96.5%, largely dragged by lease expiry of an anchor tenant at Bedok Point (9% of NLA), which saw occupancy drop a sharp 9.3ppt to 84.9%. Weighted average lease to expiry remained steady at 1.6 years.

Aggregate leverage remains healthy below the 30% mark at 28.7%, giving the retail REIT ample debt headroom to expand. All-in borrowing cost was 0.5ppt cheaper at 2.3%, with 66% (87% in prior quarter) of its debt is hedged on fixed rates.
FCT currently does not have any acquisition plans in the pipeline but is exploring AEI for Northpoint.

Despite the tight labour market and challenging retail scene, management expects FCT’s rental and occupancy at its suburban malls to remain resilient.

The REIT is currently trading at 1.1x P/B and offers an annualized 3Q15 yield of 5.8%.

Latest broker ratings:
Daiwa maintains Outperform with TP of $2.26
OCBC maintains Buy, cuts TP to $2.24 from $2.27
CIMB maintains Add, cuts TP to $2.23 from $2.24
Maybank-KE maintains Hold with TP of $2.03

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