Wednesday, January 29, 2014

Frasers Centrepoint Trust: Turning to acquisition for growth (OCBC)

Frasers Centrepoint Trust:
Fair value S$2.02
add: 12m dividend forecast S$0.113
versus: Current price S$1.79
Turning to acquisition for growth

 Frasers Centrepoint Trust (FCT) reported 1QFY14 DPU of 2.50 S cents, up 4.2% YoY, in line with our expectations. Causeway Point (CWP) continued to shine in 1Q, turning in a robust 8.6% growth in NPI, while Northpoint registered a 1.4% growth. However, its portfolio performance was somewhat dampened by Bedok Point, which saw negative reversions and occupancy drop during the quarter. Going forward, FCT disclosed that it will continue to fine-tune the tenant mix at Bedok Point, and is willing to lower rents to keep incumbents and entice new tenants for sustainable performance. Hence, pressure on base rents and fluctuations in occupancies are expected going forward. Nevertheless, management maintains that CWP and Northpoint are likely to continue to deliver in FY14. With the completion of the A&A works at CWP, FCT is also looking to acquisitions to boost growth. We maintain BUY with unchanged fair value of S$2.02 on FCT.


1QFY14 performance within view
Frasers Centrepoint Trust (FCT) released its 1QFY14 results last evening, with no surprises on its performance. NPI grew by 4.4% YoY to S$28.3m, while distributable income rose by 4.0% to S$22.7m due to improvement in revenue from Causeway Point (CWP) upon completion of its addition and alteration (A&A) works. About S$2.1m or 0.25 S cents in cash was retained for the quarter, similar to that in 1QFY13. As such, DPU increased by 4.2% to 2.50 S cents. This formed 24.4%/25.0% of our/consensus full-year DPU projections, which we deem to be consistent with expectations.

Portfolio stable despite movements within assets
CWP continued to shine in 1Q, turning in a robust 8.6% growth in NPI to S$14.1m. Northpoint also registered a 1.4% growth to S$8.8m. In addition, both malls saw robust rental reversions of 7.3%-15.4%, while occupancy rates were kept at high levels of 98.5%-99.1%. As management has previously guided, occupancy rate at YewTee Point improved by 4.4ppt QoQ to 97.1% as new tenants started their leases during the quarter. However, its portfolio performance was somewhat dampened by Bedok Point, which saw negative reversions of 16.0% and occupancy dropped from 96.7% in the preceding quarter to 80.2% due to on-going fitting of incoming tenants and impending A&A works at the basement.

Maintain BUY
Going forward, FCT disclosed that it will continue to fine-tune the tenant mix at Bedok Point, and is willing to lower rents to keep incumbents and entice new tenants for sustainable performance. Hence, pressure on base rents and fluctuations in occupancies (possibly within 80%-95% range) are expected going forward. However, management maintains that CWP and Northpoint are likely to continue to deliver in FY14, as higher secured rentals are expected upon lease renewal. With the completion of the A&A works at CWP, FCT is also looking to acquisitions to boost growth. We understand that the strata title division of One@Changi City is on target for completion, and an acquisition of Changi City Point may happen in 2014. Maintain BUY with unchanged fair value of S$2.02.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 22/01/14

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