FrasersCT – CIMB

Taking stock

• Occupancy and shopper traffic remain high. A site visit to FCT’s three properties show occupancy levels remaining high, with the exception of Northpoint which is undergoing asset enhancement work. We are positive that rents and occupancy will stay stable in FY09.

• Outlook for FCT properties remains positive. Despite a negative macro environment, we believe that suburban retail malls such as FCT’s will be resilient with no significant new supply in the suburbs, limited lease expiries in 2009 and stepped-up rents incorporated in 86% of its leases.

• Further provision for decline in Northpoint occupancy levels. While we earlier only provided for a moderate decline in Northpoint’s occupancy to 95% from full occupancy, we now factor in a more conservative decline to 70% in anticipation of more rent-free periods or rebates which may be dished out to new tenants.

• Maintain Outperform with lower target price of S$1.06 (from S$1.13). We have a lower DPU of 7.0cts (from 7.3-7.4cts) for FY09-10 as a result of lower occupancy assumptions for Northpoint. Still using DDM valuation, we have a lower target price of S$1.06 (unchanged discount rate of 9.4%). At 0.6x P/BV, FCT remains a cheaper exposure to Singapore’s retail market than CMT (0.7x). Yields remain high at 9.9%.