FCT – DBSV

Still looking attractive

• 3Q12 DPU of 2.6 Scts a record

• Operational performance stable; acquisition catalyst only in the medium term

• Maintain BUY, TP revised higher to S$1.93

Strong 3Q12. Topline and Net property income (NPI) of S$35.6m and S$24.7m were 30% and 32% respectively higher compared to a year ago. The strong y-o-y growth was well-balanced portfolio wide, underpinned by a 45% uplift in topline from Causeway Point post the intensive phase of its asset enhancement program coupled with a full quarter contribution from Bedok Point, which was acquired in 4Q11. Interest costs were lower at 2.75% post refinancing of existing short-term borrowings from recent MTN issues. As such, distributable income came in S$21.4m (boosted by S$1.2m that was retained in 1H12), translating to a record DPU of 2.6 Scts for the quarter.

Operational outlook stable. Portfolio occupancy remained steady q-o-q at 93.7% – the slight dip in occupancies at Causeway Point to 87.7% was compensated by higher occupancy rates from the reopening of a Food Court in Northpoint which saw occupancies head back up to 99.7%. Average reversions continue to remain positive at 2.7%-42.9%, with the higher end due to a single lease that was contracted at a significantly higher reversion rate. Average reversions in rental rates for 9M12 remained healthy at 12.5%. Looking ahead, we expect reversions to remain positive, underpinned by the progressive completion of AEI of Causeway Point by end of Dec’12.

Maintain BUY, TP raised to S$1.93. Stock remains attractive for its defensive earnings profile. Our TP is raised as we account for the better than expected performance of Causeway Point, lower interest cost and lower risk free assumption as we roll forward our numbers. FY13/14F yield of 5.8-5.9% remains attractive. Re-rating catalysts will hinge on the acquisition of Changi City Point.