FCT – OCBC

Boost from Changi City Point

• 3QFY14 DPU up 6.0% YoY
  
• Rental reversion at 7.8%
  
• Further growth expected
  

Strong 3QFY14 results as expected

Frasers Centrepoint Trust (FCT) reported a promising set of 3QFY14 results last evening, with gross revenue growing 3.1% YoY to S$41.2m and NPI improving 2.4% to S$29.1m. The better performance was mainly due to higher revenue from Causeway Point and maiden contribution from newly-acquired Changi City Point. Distribution to unitholders of S$25.5m (+8.6%) was further boosted by the release of S$2.1m cash retained in 1HFY14. As such, DPU for the quarter came in at 3.022 S cents, up 6.0% YoY. This brings the 9MFY14 DPU to 8.402 S cents (+5.7%), meeting 75.9%/76.4% of our/consensus full-year DPU projections.

Improvement in operating metrics

Noteworthy in 3Q was the significant improvement in FCT’s portfolio occupancy to 98.5% from 96.8% in preceding quarter. We understand that Bedok Point’s occupancy rose to a strong 99.3% from 77.0% in Mar, after several new tenants including anchor tenant Harvey Norman commenced operations in the quarter. On the portfolio basis, positive rental reversion of 7.8% was also achieved (2Q: +9.3%), with only Bedok Point registering a mild 2.9% negative reversion. Overall shopper traffic in 3Q14 picked up 2.7% QoQ, led by Causeway Point which saw a 9.0% robust growth.

Maintain BUY

While management cautions that more retail space alternatives and labour shortages are likely to pose challenges to retail landlords going forward, it expects its portfolio occupancy and rental rates to remain sustainable. We maintain our view that Causeway Point and Northpoint will continue to underpin organic growth in the year ahead, while Changi City Point will provide further boost to FCT’s income. We make minor adjustments to our forecasts as the interim results were mostly consistent with our expectations. Our fair value is unchanged at S$2.08. Maintain BUY on FCT as upside potential remains attractive.