FCT – DBSV

Clear and visible growth

• Organic growth flattish in FY11 as Causeway Point undergoes a facelift

• Earnings could surprise on the upside from potential acquisitions, which could happen in 2011

• Maintain BUY, TP revised to S$1.74 (total return 15%)

Record 4Q10 DPU of 2.16 Scts in line. Fraser Centerpoint Trust (“FCT”) reported a topline and net property income of S$32.5m (+31%yoy, +6%qoq) and S$22.2m (+26%yoy, +3%qoq) respectively, boosted by the contribution from newly acquired Yewtee Point, Northpoint 2 malls and stronger trading performance of North Point 1 post enhancement works (“AEI”). Distributable to unitholders of S$16.5m includes a S$1.6m sum retained from prior quarters (maintaining 100% payout). The portfolio also saw a 3% revaluation gain of S$42.5m (+3%) or an NAV of S$1.29.

Organic growth flattish in FY11 as Causeway Point undergoes a facelift. We continue to see positive rental reversions. For FY10, average rents were renewed at 7% higher rates. Average occupancy levels stood at 98.1%, slightly down from 99.4% a year ago. This is due to lower occupancy rates at Causeway Point (97% in 4Q10 vs 100% in 4Q09) given the ongoing AEI at the mall. While we expect occupancy levels to head down further in the coming quarters as work intensifies, we project limited impact on DPU given that works are phased over a long period of 30 months and earnings in FY11 should be somewhat offset by the full year contribution from YewTee Point and Northpoint.

Bedok Mall could be injected into FCT by 2011. The mall is currently 99% committed and is awaiting TOP in the coming months. The manager is guiding for an injection in 2011 with a potential equity fund raising to part fund this acquisition. We have not factored in this acquisition in our numbers as yet.

BUY call maintained, TP revised to S$1.74. FCT offers investors a solid FY11-12F yield of 5.3-5.5%, backed by resilient earnings from its portfolio of sub-urban malls. Catalysts for further upside to earnings hinges on the acquisition of the Bedok mall asset. BUY maintained with revised TP of S$1.74 as we roll forward our numbers to FY11.