FrasersCT – UOBKH
4QFY08: Rental reversion higher than anticipated
Strong rental reversion at Causeway Point. Frasers Centrepoint Trust (FCT) reported gross revenue of S$21.6m in 2QFY08, an increase of 10.3% yoy. Revenue contribution from its largest mall Causeway Point gained 11% yoy to S$14.6m benefitting from strong rental reversion and higher turnover rent. 20,816sf of retail space at Causeway Point representing 5% of total net lettable area (NLA) was renewed at 16% above preceding rental rates in 2QFY08. Revenue contribution from Anchorpoint doubled to S$1.6m after completion of asset enhancement initiative (AEI). Revenue contribution from Northpoint, however, dropped 3% yoy to S$5.4m. Occupancy at Northpoint declined from 100% in FY07 to 83.8% in 2QFY08 with anchor stores Cold Storage and Harvey Norman closed due to current AEI. Management has increased the number of leases with turnover rents from 16% in 2QFY07 to 62% in 2QFY08. Turnover rents currently accounts for 7% of total revenue.
Net property income increased 7.7% yoy to S$14.4m in 2QFY08 while distributable income grew 16.8% yoy to S$12m. FCT announced DPU of 1.75 cents for 2QFY08, an increase of 4.8% yoy. Management has again retained 10% of distributable income for distribution in 2HFY08.
Ready pipeline of acquisitions. FCT has a ready pipeline of acquisitions that will double NLA to more than 1.2m sf when fully completed. It has entered into a put and call option agreement with sponsor Frasers Centrepoint Limited for the purchase of Northpoint 2 at between S$139.5m to S$170.5m. Northpoint 2 is 70% completed and is expected to obtain temporary occupation permit by Aug 08. 68% of NLA has been committed and Northpoint 2 is on schedule to be injected into FCT in 1QFY09. We expect YewTee Point and Bedok Mall with NLA of 80,000sf each to be injected in 3QFY09 and 2QFY11 respectively. We estimate the three new malls to contribute 28.6% of total revenue in FY12.
Northpoint: short-term pain for long-term gain. FCT commenced S$30m major AEI at Northpoint, which will last from Jan 08 to Jun 09. Gross floor area will be transferred from the fourth floor to Level one to three, which provides higher rental yield. The AEI will integrate Northpoint with Northpoint 2 to create an enlarged shopping mall with total NLA of 232,000sf. Management expects average rental for Northpoint to increase from S$11.00psf pm to S$12.91 after the revamp, thus increasing net property income from Northpoint by 27% to S$17.6m/year. Unfortunately, contributions from Northpoint will be affected from 3QFY08 to 3QFY09 with lower average occupancy of 82%.