STI : 3,253.76
Price Target : 12-Month S$ 2.33
Gazing at the northern lights
• 3Q13 results in line
• Strong performances at Causeway Point and North Point
• Management reconfiguring Bedok Point
• Maintain BUY, TP S$2.33
Another solid quarter. FCT recorded S$40m revenue (+12% y-oy), S$28 NPI (+15% y-o-y) and S$21m distributable income (+14% yo- y). The strong set of results was attributable to higher contributions from post-AEI Causeway Point (CWP) and Northpoint (NP). DPU for 3Q13 was 2.85Scts, which included distribution of S$0.4m of retained income, bringing 9M13 DPU to 7.95Scts. This comprises c.72% of our FY13 forecast.
Causeway Point and Northpoint continue to shine. Average portfolio reversion rate was 9.4%, while portfolio occupancy edged up to 98.4%. Revenue from CWP increased 25% y-o-y, largely a result of higher occupancy (99.6% vs. 87.7%) and positive rental growth after the mall’s refurbishment which was completed in Dec 12. Revenue for NP increased 6% y-o-y, with the other malls remaining stable. Going forward, management expects revenue to be driven by CWP and NP, which account for 76% and 79% of total gross rentals expiring in FY14 and FY15 respectively. With retail supply near NP limited until 2018 and increasing pedestrian traffic at CWP, we should continue to see positive rental reversions at both malls.
Bedok Point a work in progress. Management has indicated that they will spend the next 12-18 months repositioning Bedok Point in light of the completion of Bedok Mall at the end of the year. With c.73% of leases due to expire in FY14 and FY15, management is looking to refresh the tenant mix and bring in a larger tenant to anchor the basement level, which was previously running on a master lease. Going forward, management expects rents to be stable or slightly negative as they are willing to accept lower rents in exchange for a more optimal tenant mix.
Maintain BUY, TP S$2.33. In the coming quarters, CWP and NP will continue to be the two key growth drivers for the REIT, with performances for the other malls remaining stable. In addition, we expect the acquisition of Changi City Point to be completed in FY14, and this should contribute positively to earnings. We like FCT for its exposure to the resilient suburban retail segment and its inorganic growth opportunities. Maintain BUY, TP unchanged at S$2.33.
Publish date: 24/07/13