Frasers Centrepoint Trust – Nearly-full portfolio occupancy April 28, 2023 472

PSR Recommendation: ACCUMULATE Status: Maintained
Last Close Price: 2.2 Target Price: 2.35
  • 1H23 DPU of 6.130 Singapore cents (-0.1% YoY) was in line and formed 51% of our FY23e forecast.
  • All portfolio properties achieved higher revenue and NPI YoY, supported by higher atrium income and rent growth. Retail occupancy reached a high of 99.2%; tenant sales and shopper traffic improved 9.2% and 35.3% YoY respectively.
  • Maintain ACCUMULATE, DDM TP increased from S$2.31 to S$2.35 as we raise our FY23e-FY25e DPU estimates by 1-2% on the back of higher portfolio occupancy. Current share price implies a FY23e DPU yield of 5.5%.

 

 

The Positives

+ Retail portfolio occupancy improved 0.8%-point QoQ to 99.2%, mainly due to the backfilling of the anchor cinema space at Century Square, taking its occupancy from 88.7% to 96.8%. Occupancy at all nine malls came in at above 96.8%, with five malls having an occupancy of 99% or higher. 1H23 rental reversions for the retail portfolio were +1.9%, up from +1.5% in FY22. After starting FY23 with 27.6% of leases (by GRI) expiring in the year, 11.4% remain for the rest of this financial year. As a reflection of the strong underlying demand, about 16.2% of leases (by GRI) have been renewed in 1HFY23, with 11.4% yet to be renewed by this FY.

 

+ Tenant sales and shopper traffic grew 9.2% and 35.3% YoY, indicating resilient retail sales. However, we expect tenant sales growth to moderate going forward due to the increase in Goods and Services Tax rate and a slowdown in consumer spending. 

 

The Negative

– Gearing increased from 33.9% to 39.6%, due to the increase in bank borrowings to finance the acquisitions of the effective 25.5% stake in NEX and the additional 10% stake in Waterway Point which were completed in February 2023. However, the proportion of fixed interest rate borrowings increased from 73.2% as at 1Q23 to 76.4%, and the all-in cost of debt increased only 10bps QoQ to 3.6%. FCT indicated that it has secured financing to refinance all borrowings due in FY23 (17.7% of total), which we think is likely at above 4%.

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About the author

Profile photo of Darren Chan

Darren Chan
Research Analyst
PSR

Darren has over three years of experience on the buy-side as a fund manager. During his time as fund manager, he has managed multiple funds and mandates including dividend income, growth, customised, Singapore focused and regionally focused funds. He graduated from the University of London with a First-Class Honours degree in Banking and Finance.

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