FrasersCT – DBS

Steady first quarter

Comment on Results

FCT reported 1Q08 results in line with expectations. Gross revenues were relatively flat y-o-y at S$20.1m. Main contributions were from the increase in rentals of renewed leases with over 10.7% rental reversions from the preceding period. DPU for 1Q08 is up 5% y-o-y to 1.6 cts.

Occupancy levels were slightly higher at 99.3% as at 30 Dec 07 (94.5% in preceding quarter) mainly from improvement in occupancy rates in Anchorpoint mall.

Gearing at 31%. FCT’s gearing level of 31% is well within the potential 60% limit, giving it a potential S$280m worth of debt-funded acquisitions that we expect will be utilised for the purchase of Northpoint II in 4Q08.

Recommendation

With exposure to the buoyant suburban retail scene, FCT is poised to benefit from positive rental reversions (up to 60% of NLA expiring in FY08-FY09), asset enhancement initiatives, and a steady pipeline of sponsor assets. Collectively, these factors will drive DPU growth moving forward through 2010.

Target price maintained at S$1.71. Currently trading near its NAV, we see value emerging from recent price pull back and we look forward towards the pipeline injection of North Point II (expected 4Q08) for AUM growth, not discounting further upside surprise from potential 3rd party and overseas acquisitions.