FrasersCT – DBS

Quiet Gem

FCT’s 1Q09 results spring no surprises as it delivered a DPU of 1.69cts on the back of resilient earnings from its portfolio of sub-urban malls. Looking ahead, earnings should remain stable with 90% of its income locked in. In addition, AEI activities at Northpoint will likely boost portfolio revenues and occupancy levels further when completed in Jun’09. As such, we believe that FCT should continue to deliver a sustained FY09-10 DPU yield of c.11%. Maintain buy, TP$0.81 based on DCF.

Results in line. 1Q09 distributable income of S$10.4m(+4.4% yoy) was within 25% of our forecast. DPU of 1.69 Scts was a 4% growth from that a year ago. Gross revenues and NPI were slightly weaker yoy at S$19m (–3%) and S$12.8m (–8%) respectively, due to planned vacancies at Northpoint offset by continued positive rental reversions at Causeway Point. NAV stood at S$1.23 with a low gearing of c.29%.

Defensive earnings. 90% of FY09 income locked in. With over 90% of its FY09 income already locked in, we believe that FCT, with its portfolio of sub-urban malls, should continue to deliver stable cash flows over the course of the current recession. Major mall anchors like Cold Storage and Food Junction catering to serving daily necessities, F&B and non-discretionary spending is likely to keep consumer traffic high.

Maintain Buy. We believe that FCT should continue to deliver a sustainable 11% FY09-FY10 DPU yield to unitholders. Catalyst for the stock will stem from future asset injections in the medium term when capital and credit markets ease, which will improve the liquidity of the stock. Maintain BUY.