January 25, 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.

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