Month: April 2012
FCT – DMG
All time new high
2QFY12 DPU in line with expectations. Frasers Centrepoint Trust (FCT) reported a strong 2QFY12 DPU of 2.50S¢ (+20.8% YoY). Together with 1QDPU of 2.20S¢, 1H12 results translates to 50.5% of our FY12 DPU estimate. Revenue for 2QFY12 grew to S$36.7m (+27.4% YoY) while net property income rose to S$26.2m (+30.4% YoY). These strong growths are mainly attributed to additional contributions from Causeway Point (CWP) and the acquisitions at Bedok Point. In the subsequent quarters, we expect FCT to register stronger numbers on the back of 1) increased contributions from CWP as average occupancy and rental rates continue to pick up from its lows during the initial stage of AEI, 2) new contributions from Bedok Point and 3) positive rental reversions in suburban malls to continue. Given FCT’s well positioned malls, together with its defensive play, we maintain our BUY call on FCT with an unchanged DDM based (COE: 8.8%, terminal growth: 2.0%) TP of S$1.77. With FCT currently trading at 4.7% spread vs the historical mean of 4.0%, our TP represents a spread of 3.9% posting a potential upside of 13.8%
Suburban malls concentrating in high shopper traffic area. Going forward, we expect market confidence for rental rates in suburban malls to remain as international brands continue to take up space in malls with high shopper traffic. Currently, all five of FCT’s malls are located in high population catchment areas with an expected average shopper traffic of 33m/year for 2 of its larger malls (Causeway point & Northpoint) and 8m/year for its smaller malls (Bedok Point, YewTee Point & Anchorpoint).
Additional contributions from Causeway point and Bedok point. In the subsequent months, we expect FCT’s DPU to continue to grow on the back of additional contributions from both CWP and Bedok Point. Currently, works at CWP are on track for full completion by December 2012, while Bedok Point continues to grow strongly; contributing S$3.05m (+6.3% QoQ) to the group’s 2QFY12 revenue.
Respectable growth expected in 2012. As the outlook for suburban malls remains strong, together with respectable DPU growth for the rest of the year, we continue to maintain our BUY rating with a TP of S$1.77.
FCT – CIMB
Suburban still in fashion
FCT hit a record high quarterly DPU in 2Q12. In a somewhat atypical move, management guided for positive factors to help sustain its performance in 2H12. Backed by favourable retail tail winds and results from Causeway Point AEI this year, were main bullish.
2Q12/1H12 DPUs were broadly in line with our estimates and consensus, forming 27/51% of our full-year estimates. We raise DPUs to factor in stronger rentals and margins. Maintain Outperform with higher DDM-based target price (discount rate of 7.9% vs. 8.4% previously.
A good quarter
2Q12 NPI was up 30% yoy as a 1.7% pts improvement in NPI margins added to a 27% increase in top-line with higher occupancy at Causeway Point and rental reversions. Performance was good with 2Q12/ 1H12 DPUs up 21%/17% yoy and forming 27%/51% of our full-year estimates, despite higher retained earnings and more management fees paid out in cash (80% vs. expected 70%). Management has also, in a somewhat atypical move, guided for positive factors to help sustain FCT’s performance in 2H12. Occupancy at Causeway Point was at 91.3% as at end-2Q12 and is expected to trend around 90% for the rest of FY12. We expect any impact to be mitigated by retained earnings of S$2.3m in 1H12 (1H11: S$0.3m). Space under AEI is likely to have been fully pre-committed with management guiding for full occupancy on completion in Dec 12.
Positive rental reversions
Rental reversions strengthened to +11.0% over preceding leases vs. 1Q12’s +9.6%, aided by NorthPoint (+12.5%) and Yew Tee Point (+12.1%). While occupancy dipped to 92.5% from 99.7% at North Point due to a change in food-court operator, we are not overly concerned as we expect higher rentals for new leases given tight demand for space at the mall and the new foodcourt expected to be operational by May 12.
Potential interest savings
We expect some interest cost savings when FCT refinances its S$75m MTN (14% of total debt) in Jun 12, given a fairly high cost of 4.8%. Asset leverage remains a fairly healthy 31%.
FCOT – CIMB
Management scores again
FCOT’s sale of KeyPoint for3.1% yield and an estimated S$73m gain is a major positive, in our opinion, opening doors to options, all of which could be accretive for unit-holders. We continue to expect stock outperformance, as management continues to deliver.
We keep DPU estimates unchanged pending EGM approval of the deal (expected in Jul) though we believe unit-holders are likely to approve. Maintain Outperform and DDM target price (discount rate: 9.4%).
What Happened
FCOT will be selling KeyPoint for net proceeds of S$357.8m (S$1.2k psf, S$73m above book value of S$285m) for a tight yield of 3.1%. The buyer is a company jointly owned by Fragrance Group and World Class Land Ltd. Proceeds will be used to lower asset leverage. As expected, management won’t be paying out capital gains.
What We Think
The sale is not a major surprise given previous news reports of management’s intention and based on past conversations with management. Management had, in fact, somewhat “dragged its feet” on this long-awaited S$ refinancing. Assuming all the proceeds are used to lower debt, we estimate that asset leverage will drop near 28%. Qoq fluctuations from a loss of income from KeyPoint should be minimised by its recently-acquired 50% stake in Caroline Chisholm Centre, and also adequately compensated by interest cost savings upon any debt repayment (estimated S$ cost of borrowing of 3.8-4.0% vs. divestment yields of 3.1%), assuming no major time lag.
Management should be able to gear up eventually at low costs of borrowing to :1) redeem its 5.5% CPPU; 2) buy back shares at current yields of 7-8% (both immediately accretive); and/or 3) buy Valley Point and/or Alexandra Point from its sponsor (less accretive but expanding its asset base). All combinations should work out positively for unit-holders.
What You Should Do
The deal is a major positive, further bolstering our confidence in management. Maintain Outperform.
FCT – BT
Frasers plans record DPU as Q2 gain soars
FRASERS Centrepoint Trust (FCT) is paying its highest ever distribution per unit (DPU) after second-quarter earnings beat forecasts on the back of additional revenue from Bedok Point and refurbished Causeway Point malls.
"We have achieved another quarter of strong growth," Frasers chief executive Chew Tuan Chiong said in a statement.
"The asset enhancement of Causeway Point and the acquisition of Bedok Point are delivering sustainable income growth that helps drive higher DPU for our unitholders. FCT is also benefiting from higher rental rates achieved from new and renewed leases. We expect these positive factors to sustain FCT's performance through the second half of this year."
Frasers, a retail real estate investment trust (Reit), reported net income of $18.8 million in the second fiscal quarter ended March, up 46.2 per cent from the year-ago period.
Rickmers – BT
Rickmers' Q1 DPU stays flat at 0.6 US cent
Shipping trust posts profit of US$8.2m, down 12% year on year from US$9.3m
RICKMERS Maritime reported distribution per unit (DPU) of 0.6 of a US cent for the first quarter ended March 31, 2012, that was unchanged from the year-ago period.
The shipping trust turned in "stable" quarterly results, said its trustee-manager Rickmers Trust Management (RTM).
Charter revenue of US$35.7 million was almost flat from last year's US$35.9 million. Net profit was US$8.2 million, down 12 per cent year on year from US$9.3 million.
Cash flow from operating activities dipped 3 per cent to US$24.9 million from US$25.7 million in the year-earlier period because of scheduled dry docking for its ships and 29 off-hire days for the container ship Kaethe C. Rickmers when it was in between employment contracts.