FrasersCT – CIMB
Resilient in a downturn
• Full year in line. 4Q08 results were in line with Street and our expectations. DPU of 2.05cts forms 29% of our full-year forecast of 7.08cts. Full-year DPU of 7.29cts forms 103% of our estimate. Gross revenue of S$22.1m for the quarter was up 11.4% yoy, driven by a strong performance from Causeway Point and the newly refurbished Anchorpoint. Full-year gross revenue of S$84.7m was up 9.2% yoy. Growth in distributable profit was stronger than gross revenue on a yoy basis at 11.3% boosted by Hektar REIT’s contributions.
• AEI and acquisition updates. AEI initiatives for Northpoint were on track with full completion by Jun 09, management said. Pre-commitments are high at about 90%. Projected average monthly rents after the AEI is S$13.20psf, up 20% from S$11.00psf before. However, due to the current credit crunch and the fact that physical asset yields are presently lower than FCT’s trading yields and are thus not likely to be DPU-accretive, planned injections of Northpoint 2, Yew Tee Mall and Bedok Mall into FCT will be delayed.
• Healthy finances. Balance sheet was defensive with no significant debt due for refinancing until 2011. Current asset leverage is low at 28.1%.
• Changes to assumptions. We remove our earlier forecast of acquisitions for Northpoint 2, Yew Tee Mall and Bedok Mall, while maintaining our forecast of near full occupancy for FCT as there is no known upcoming supply in the vicinity of FCT’s major malls, Causeway Point and Northpoint. Separately, we increase our associate contributions on strong FY08 performances.
• Maintain Outperform; lower target price of S$1.13 (from S$1.49). Following our adjustments, our DPU estimates for FY09-10 decrease by 4-6%. Accordingly, our DDM-derived target price (new discount rate of 9.7% from 8.5%) drops to S$1.13 from S$1.49. We also introduce FY11 estimates. We remain confident that FCT’s rents will stay resilient in an economic downturn, backed by limited supply and tenants catering to non-discretionary spending.