FCT – CIMB

Riding on retail growth

• Maintain Outperform. We expect strong job and wage growth to support retailsales (ex-auto) growth of about 7% for Singapore this year (7.2% in 2010) and growth in real private consumption of 3-3.5% (4.2% in 2010, 0.2% in 2009). With FCT’s portfolio of well-located retail malls, we expect the strength to drive up occupancy rates and rental reversions at FCT’s retail malls. Ongoing enhancement at Causeway Point and any upside from higher turnover rents should also support organic growth while an impending injection of Bedok Mall from its sponsor could provide acquisition catalysts. Maintain Outperform and DDM-based target price of S$1.86 (discount rate 7.9%). We see catalysts from announcements of accretive acquisitions.

• Positive rental reversions expected. Notwithstanding lower Causeway Point income during its refurbishment, contributions from acquisitions and higher rental reversions lifted FCT’s 1Q11 NPI by 17% yoy. With positive rental reversions expected from stronger retail sentiment and ongoing asset enhancement at Causeway Point, its largest asset, we are expecting a stronger 2H11.

• Acquisition catalyst from Bedok Mall injection. Bedok Point received TOP in Nov 10. With the asset 98% leased as at end-1Q11, we see acquisition catalysts from an expected injection into FCT (targeted for CY11). Any accretion should also provide upside to our estimates.