FCT – CIMB

Ready for next stage of growth

With footfalls returning to the pre-asset enhancement initiative level and the increase in sales per sq ft, we expect Causeway Point to continue to grow albeit at a slower rate. The next stage of growth is expected to come from the accretive acquisition of Changi City Point.

4QFY13 results are in line, with DPU accounting for 28% of our full-year forecast and FY13 results at 103%. We tweaked our model to account for the slightly better-than-expected results. Maintain Outperform with higher DDM-based (discount rate: 7.4%) target price of S$2.05, given re-rating catalysts from accretive acquisitions and strong rental reversion.

Big malls continue to be the focus

4QFY13 results were respectable, mainly due to the contribution of 0.35 Scts from cash retained in 1H13. Distributable profit before retained earnings made up 25% of our full-year forecast. During this quarter, NPI was down by 5% yoy as a result of higher property tax and maintenance expenses. For the full year, FY13 NPI growth of 6.9% was mainly led by Causeway Point and Northpoint. During this quarter, the performances of Anchorpoint and Bedok Point were weak, mainly due to lower revenue and higher property expenses. However, we believe the performances of these malls will stabilise henceforth, with Anchorpoint's occupancy expected to climb from its current level of 96.9% and rental rates at Bedok Point to steady.

Awaits acquisition

With 31% and 37% of leases (as % of total NLA) due to be renewed in FY14 and FY15 respectively, the majority of which are concentrated in Causeway Point and Northpoint, we expect rental reversions to continue for some years. Also, Changi City Point's acquisition is expected to be FCT's next growth catalyst.

Grow through acquisitions

With a gearing of 27.6% and several ongoing projects from its sponsor, we believe FCT is well-positioned to benefit from a steady pipeline of potential future acquisition targets.