FCT – CIMB

Mall visits fuel further positivity

• Mall visits fuel further positivity. We visited FCT’s Causeway Point and its newly acquired Bedok Point recently. Shopper traffic was decent at Bedok Point though we see room for improvement in occupancy and tenant mix. Causeway Point was bustling despite major AEI work and ROI may beat management’s target of 13%. As FCT’s largest asset, we see the refurbishment of Causeway Point as a potential game-changer for FCT. With funding details concluded, we factor in the acquisition of Bedok Point and raise our FY12-13 DPU estimates by less than 1%. Our DDM based target price is, however, unchanged at S$1.63 (discount rate 8.4%). We continue to like FCT’s exposure to resilient suburban retail assets and strong balance sheet (34% after acquisition), anticipating catalysts from stronger-than expected rentals for Causeway Point after its refurbishment and improved stock liquidity.

• Bedok Point: decent mall with scope for improvement. Shopper traffic was relatively light during our visit on a late weekday afternoon though it is not hard to imagine a packed mall during lunch and dinner time given its high F&B content. We see room for improvement in occupancy and tenant mix.

• Causeway Point: the real game-changer. Causeway Point was bustling during our visit on a weekend afternoon despite ongoing AEI. We like its open-store concept, brighter and wider passageways, new-to-market brands and more higher-end retail offerings after AEI and see the potential for the mall to beat management’s ROI target for the refurbishment.