Frasers Centrepoint Trust
Target Price: SGD2.20
A Better Than Expected 3Q
FCT reported a distribution per unit (DPU) of 2.85 cents (+9.6% y-o-y) for 3QFY13, above our FY13 forecasts by 1.4%. Revenue for the quarter grew 12.4% y-o-y to SGD40.0m while net property income climbed 15.4% y-o-y to SGD28.5m. In view of the better-than-expected results, we are upgrading FCT to a BUY, with our DDM-based TP tweaked slightly higher to SGD2.20.
• A stellar quarter. Frasers Centrepoint Trust (FCT) reported strong 3QFY13 results, mainly attributed to higher contributions from Causeway Point (CWP) and Northpoint. During the quarter, revenue from CWP expanded 24.6% y-o-y to SGD19.3m, driven by positive rental reversion and additional income from short-term leases of common space. Meanwhile, revenue from Northpoint grew 6.0% y-o-y on the back of positive rental reversion.
• Earnings to remain stable for the next few years. With only 4.5% of total gross rental income of space to be renewed in FY13, we believe FCT’s earnings will continue to remain stable. In the longer term, Causeway Point and Northpoint will account for 56.5% and 69.2% of the total net lettable area due for renewal in 2014 and 2015. Given the stellar performance of these malls, we expect FCT to face no difficulty renewing their leases. This translates to a stable and sustainable income for the FCT in the long run.
• Changi Citypoint acquisition to drive growth. We expect FCT’s next growth driver to come from the acquisition of Changi Citypoint. However, since the strata title sub-division of the One@Changi City project is in progress, we expect this acquisition to only come through in the next financial year.
• Upgrade to BUY, with higher SGD2.20 TP. In view of the stellar performance of its two major malls, together with an expected c.0.34 cent/unit of previously-withheld income to be distributed in the next quarter, we expect to see good growth in the REIT’s DPU in 4QFY13. On this basis, we upgrade FCT to a BUY as we lift its DDM-based TP to SGD2.20 (COE: 8.2%, TGR: 2.0%).
Publish date: 24/07/13