Category: FCT
FrasersCT – BT
Frasers Centrepoint Trust’s Q4 DPU up 23%
Strong performance by Causeway Point and Anchorpoint
FRASERS Centrepoint Trust (FCT) has announced distribution per unit (DPU) of 2.05 cents for its fourth quarter ended Sept 30, a 23 per cent increase from Q4 last year, manager Frasers Centrepoint Asset Management (FCAM) said yesterday.
Full-year 2008 DPU rose 11 per cent to 7.29 cents.
FCAM chief executive Christopher Tang said Q4 capped a successful year for FCT – ‘another consecutive year of sustained growth’.
A strong performance by Causeway Point and the reinvigorated Anchorpoint continued to drive gross revenue and net property income growth, according to FCT.
Q4 gross revenue grew 11 per cent to $22.1 million, while net property income increased 10 per cent to $14.1 million. FY2008 gross revenue and net property income were both up 9 per cent to $84.7 million and $56.6 million respectively.
Q4 leases at Causeway Point were renewed at 15 per cent above preceding rates, reflecting strong demand and tight supply situation in the suburban retail sector.
Anchorpoint’s Q4 2008 gross revenue more than tripled to $2.4 million from the year earlier. Rents increased more than 40 per cent as the mall reverted to full occupancy after the completion of enhancement work.
Overall portfolio occupancy declined to 87.7 per cent at Sept 30 from 94.6 per cent a year earlier, as a result of planned vacancies associated with enhancement work at Northpoint.
FCT said it has a conservative gearing level of 28.1 per cent and faces no refinancing pressure, It has no material refinancing and interest rate risks as its term loan amounting to $260 million only expires in July 2011, and its associated interest rate is fully hedged.
Asset enhancement works at Northpoint are on schedule for completion by June next year, the trust said. Rents at Northpoint are projected to increase 20 per cent to $13.20 per sq ft per month, translating to a 30 per cent increase in net property income to $18 million.
With close to 90 per cent of its post-enhancement net lettable area already committed, Northpoint is set to provide a substantial boost to FCT’s income from the second half of FY2009 onwards.
Frasers CT – BT
By WONG WEI KONG
Frasers Centrepoint Trust (FCT) has announced distribution per unit (DPU) of 2.05 Singapore cents for its fourth quarter ended Sept 30 2008, an increase of 23 per cent from the same period last year, said manager Frasers Centrepoint Asset Management Ltd (FCAM).
Full year 2008 DPU rose 11 per cent to 7.29 cents.
Said chief executive of FCAM Christopher Tang: ‘FY2008 capped a successful year for FCT as we deliver another consecutive year of sustained growth’.
Strong performance at Causeway Point and excellent results at the reinvigorated Anchorpoint continued to drive gross revenue and net property income growth, according to FCT.
Fourth quarter gross revenue grew 11 per cent to S$22.1 million while net property income increased 10 per cent to S$14.1 million. FY2008 gross revenue and net property income were similarly up 9 per cent to S$84.7 million and S$56.6 million, respectively.
Rentals at Causeway Point were renewed at 15 per cent above preceding rates in Q408, reflecting the continued strong demand as well as tight supply situation in the suburban retail sector.
Anchorpoint’s Q408 gross revenues more than tripled to S$2.4 million from the year before, as rents increased over 40 per cent while the mall reverted to full occupancy after the completion of enhancement work.
Overall portfolio occupancy declined to 87.7 per cent as at 30 September 2008 from 94.6 per cent a year ago as a result of planned vacancy associated with enhancement work at Northpoint.
FCT said it has a conservative gearing level of 28.1 per cent and no refinancing pressures, It has no material refinancing and interest rate risks as its term loan amounting to S$260 million only expires in July 2011, and its associated interest rate is fully hedged.
The asset enhancement works at Northpoint is on schedule for completion by June next year, it said. Rentals at Northpoint are projected to increase 20 per cent to S$13.20 per square foot per month, translating to a 30 per cent increase in net property income to S$18.0 million. With close to 90 per cent of Northpoint’s post enhancement net lettable area already committed, Northpoint is set to provide a substantial boost to FCT’s income from the second half of FY2009 onwards.
REITs – DBS
Examining trough valuations
Going for high risk aversion. We re-iterate our view that the S-reit sector has been de-rated sufficiently for the prospects of slowing earnings growth momentum and possibility of capital value write-downs as well as refinancing concerns. The sector is trading at 7.6% FY08 yield or a 450bps above the current Singapore 10-year bond yield and a hefty 3.7% pt ahead of our projected peak bond yield of 3.9%. The 0.94x P/RNAV already reflects an average 20% cut in capital values across all property sub-segments. S-reits are also trading between 3.5-12% implied cap rates, as investors priced in a bear case scenario.
Office and hospitality sectors may lag: Granted that at this period of higher investor risk aversion, volatile capital value outlook and tight credit conditions, valuations are unlikely to approach previous highs in the short term, we believe that at the current level, much of the anticipated risks are factored in the S-reits lowered valuations. In terms of the various segments, the office and hospitality space poses the most downside risk given the former’s strong correlation to GDP growth and skewed supply/demand dynamics as well as limited earnings visibility in the short-stay accommodation segment.
Go for defensive: While we believe DCF-based measurements are still valid to give investors a longer term total return picture, we are ascribing a discount to these values to derive our price targets given current uncertain environment. Our strategy would be to prefer the more defensive S-reits, particularly those in the healthcare, industrial and retail space. Our top picks are Parkway Life Reit, which offers a highly defensive earnings model with minimal earnings downside risks and exposure into the growing aging population. While stock liquidity may be an issue, we believe this can likely be addressed progressively in the long term. Amongst the larger cap names, we maintain our buy rating on A-reit for its long lease expiry profile and CMT, Suntec and FCT as a suburban retail players with a diversified tenant base. Share prices of ART had been bashed down significantly and at the present level, we see value emerging given its steep discount to RNAVs.
Parkway Life Reit (PREIT SP, TP $1.35)
ParkwayLife REIT (PREIT) offers an exposure to the region’s growing need for healthcare facilities due to an aging population. It is currently trading at 0.8x of book NAV and offers a net dividend yield of 6.4% for FY08F and 6.8% for FY09F. Earnings downside risk is negligible thanks to its revenue model that is based on the higher of i) base rental of S$30m plus 3.8% of the adjusted hospital revenue; or, (ii) preceding year’s rental multiplied by [1+(1%+CPI of preceding year)]. Our DCF-derived target price of S$1.35 (6.3% WACC, 1% terminal growth) offers potential upside of 29%. In addition, refinancing risk is minimal with a low gearing of
10.2%. Maintain Buy.
CapitaMall Trust (CT SP, TP $2.96)
CMT remains one of our key picks due to its strong operational history with a proven expertise in optimizing asset yields through their various AEI activities. Moving forward, catalyst for growth will derive from I) rental reversion from the expiry of 69% of its portfolio income over FY09-10, ii) planned AEI activities amounting to $288m, largely from SSC and JEC, should boost bottomline in the medium term and iii) The Atrium purchase, which is pending completion, should grow NPI further when plans to re-position the asset is completed in 2010.
Ascendas REIT (AREIT SP, TP $2.33)
We like AREIT for its i) quality portfolio of industrial assets, which are enjoying occupancies in excess of 98%, ii) business and science parks exposure that is expected to remain robust on the back of over-spilling demand from office space crunch in the CBD. This segment makes up 25% of its total portfolio. iii) proven development capability which will are higher yielding compared to asset purchases. In this aspect, AREIT has S$309m worth of development assets in the pipeline. Iii) financial flexibility, AREIT management has adopted a prudent capital management strategy which is reflected in its gearing of 38.2%.
Frasers Centerpoint Trust (FCT SP, TP S$1.26)
Frasers Centerpoint Trust (FCT) offers exposure to Singapore’s suburban retail sector through its 3 sub-urban retail malls located in major population catchment areas in Singapore. Earnings should remain resilient given that it derives mainly from non-discretionary spending. In terms of portfolio growth, acquisition of Northpoint II scheduled to TOP by by 08/early 09 kickstarts its portfolio growth plans with other properties such as Yew Tee Mall and Bedok Mall to follow suit in 1H09 and 2010/11 respectively. FCT is expected to tap debt and capital markets for these purchases.
Suntec Reit (SUN SP, TP $1.55)
Suntec Reit offers investors exposure to a more defensive business model of office and retail assets through its portfolio of 1.9msf NLA. DPU growth over the next 2 years is derived from office lease reversions and higher retail rents. Plans to enhance Park Mall and add 67000sf of GFA could provide further upside to our projections in the medium term. Refinancing concerns have been largely allayed by putting in place a $420m club loan. Our price target offers total return of 15%.
Ascott Residence Trust (ART SP, TP S$0.94)
Ascott Residence Trust (ART), as the first Serviced Residence REIT, offers exposure to the Asean booming serviced residence industry. We believe ART presents the least earnings risks amongst the hospitality peers with a regional portfolio exposure that reduces country specific risks. In addition, its average portfolio lease of 8 months should delay an impact of a downside in spot rates. In addition, potential acquisition
Link – Table
FrasersCT – OCBC
Safety in the suburbs
Safety in the suburbs. We are resuming coverage on retail S-REIT Frasers Centrepoint Trust (FCT). We believe that its suburban assets – Causeway Point, Northpoint, and Anchorpoint – are an interesting low beta play in the current uncertain economic environment. We note that occupancy levels have generally held during previous crises and we like the malls’ massmarket consumer focus. These properties are strategically located adjacent to MRT stations and bus interchanges, and enjoy captive markets with strong population catchments and limited alternative shopping choices. FCT also owns a 31.06% stake in Malaysian Hektar REIT [RM 1.03, Notrated] whose retail assets enjoy a similar profile.
Asset enhancement focus. Since its July 2006 listing, FCT’s focus has been on extracting value from its existing portfolio. Asset enhancement works at Anchorpoint over 1Q07 – 1Q08 (year ending Sep 30) yielded a 41% jump in average rentals from S$5.32 psf per month to S$7.50 psf pm. Northpoint is FCT’s current target and management expects average rentals to increase 17% from S$11 psf pm to S$12.91 psf pm after works are completed in 3Q09. FCT’s largest property Causeway Point is next in line but details have yet to be announced.
Strong pipeline but financing a concern. FCT is ready to realize its sponsor-driven pipeline over the next two years. First in its sights is the 83,000 sf extension to Northpoint. Management has told us that 96% of Northpoint 2 is committed or in advanced stages of negotiations. Both the extension and the YewTee Mall could potentially be injected into the REIT in the next 6-9 months. Our major concern here is the lack of clarity about the executing of the portfolio expansion – the timing, pricing, financing and consequently, accretion. FCT is currently geared at a comfortable 29% and could ostensibly absorb Northpoint 2 on debt only. However, we believe a fresh equity injection will be necessary to fund subsequent buys, adding another layer of uncertainty.
Fully valued – resume with HOLD. FCT is trading at a FY09F DPU yield of 5.8% (existing portfolio), which we find expensive versus other SREITs. We like FCT but we believe it is fully valued at current price levels. The various uncertainties attached to acquisitions make us wary of awarding a premium to S-REITs for future external growth. The counter’s low liquidity arising from a small size and high sponsor ownership is another concern in a bear market. We resume coverage on FCT with a HOLD rating and S$1.20 fair value estimate.
FrasersCT – UOBKH
Defensive strength from suburban malls
Growth from Causeway Point and Anchorpoint in 4QFY08. Revenue contribution from Causeway Point increased 7% yoy to S$13.8m in 3QFY08 and accounted for 66.3% of total revenue. 6,708sf or 1.6% of net lettable area (NLA) at Causeway Point was renewed in 3QFY08 at 17.3% above preceding rental rates. Revenue contribution from Anchorpoint more than tripled to S$1.7m after a 40% increase in rents and recovery to full occupancy after completion of asset enhancement initiative. Overall occupancy was 95.7% in 3QFY08 compared to 92.9% last year. This is despite lower occupancy of 82.9% at Jun 08 for Northpoint due to asset enhancement works. Distributable income increased 19.1% yoy to S$12.2m. FCT declared DPU of 1.88 cents for 3QFY08, up 12.6% yoy, and will be paid on 29 Aug 08.
Cushion from income retained. FCT has retained DPU of 0.18 cents in 1QFY08, 0.19 cents in 2QFY08 and 0.1 cents in 3QFY08, a total of 0.47 cents. FCT is committed to distributing 100% of distributable income and the retained income will be distributed in 4QFY08. This will mitigate negative impact from asset enhancement works at Northpoint, which will affect higher yielding space at Level 1 to level 4 in 4QFY08. The upgrade is scheduled for completion in Jun 09. Management expects average rent for Northpoint to increase 17.4% to S$12.91psf pm after the asset enhancement initiative is completed.
Northpoint 2: on track for injection by Mar 09. Construction for Northpoint 2 is on schedule to obtain temporary occupation permit (TOP) by Aug 08. 96% of NLA is already committed or in advance stage of negotiation. FCT 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. The mall is targeted for injection into FCT in 1HFY09 (by Mar 09).
FCT has a ready pipeline of acquisitions that will double total NLA to more than 1.2m sf when fully completed. Besides Northpoint 2, we expect YewTee Point and Bedok Mall with NLA of 80,000sf each to be injected in 3QFY09 and 2QFY11 respectively. We estimate that the three new malls will contribute 29% of total revenue in FY12.
No refinancing risk. FCT has a conservative level of gearing at 29.5%. There is no requirement for refinancing till Jul 2011 when term loan of S$260m matures. Moody’s Investor Service has provided corporate rating of A3.
Maintain BUY. FCT focuses on suburban retail malls located in the HDB heartland, which provides defensive qualities. It provides distribution yield of 6.2% for FY08 and 6.7% for FY09, an attractive spread of 2.8% and 3.3% over 10-year Singapore government bond yield of 3.4%. Our target price for FCT is S$1.55 based on dividend discount model (required rate of return: 8.5%, terminal growth: 2.8%).