Frasers Centrepoint Trust – The road to recovery July 27, 2020 237

PSR Recommendation: ACCUMULATE Status: Maintained
Last Close Price: S$2.34 Target Price: S$2.69
  • Portfolio occupancy fell by 1.5ppts QoQ and 2.2ppts YoY to 94.6%; only 4.8% of NLA left for renewal for FY20.
  • Shopper traffic for the second week of July improved to 61.1% of last years’ levels, from 48.2% as of end-June; 95% of tenants are currently operating.
  • Maintain ACCUMULATE with a higher TP of $2.69 (prev. $2.61). We tweak our forecast to incorporate the additional 12.07% stake in PGIM ARF which was completed on 6 July 2020 as well as the loan facilities which were drawn down. DPU yield for FY20e/FY21e stands at 4.1%/5.9%.

 

The Positives

+ Only 4.8% of NLA left for renewal in FY20. Of the 32.7% of NLA up for renewal in FY20, 4.8% of NLA remain for the year. Rental reversions for 3Q20 were positive, although actual numbers were not disclosed. While the leasing environment is expected to remain weak, the management shared that there has been some demand from F&B tenants.

+ Shopper traffic for the second week of July improved to 61.1% of last years’ levels, from 48.2% as of end-June. The lower traffic in July was largely due to the safe distancing and traffic density measures which are still in place. 95% of tenants are presently trading. Recovery in shopper traffic was less pronounced at Changi City Point (CCP), which relies more on the office crowd from Changi Business Park, as well as Anchorpoint and Bedok Point which had housed fewer essential services (i.e. supermarkets) as compared to heartland malls in areas with live-in catchment (Causeway Point, Northpoint, Waterway Point).

 

The Negatives

Portfolio occupancy fell by 1.5ppts QoQ and 2.2ppts YoY to 94.6%. Occupancy weakened across all malls, led by Bedok Point -3.7ppts, Yew Tee Point -2.6ppts and CWP -1.2ppts.

 

Outlook

FCT had disbursed c.$25mn out-of-pocket rental rebates YTD and have fulfilled the mandated 2 months’ worth of rental waivers under the Rental Relief Framework (for SMEs) for qualifying commercial tenants. FCT retained $18mn in distributable income YTD for cashflow purposes.

 

Maintain ACCUMULATE with and higher TP of $2.69 (prev. $2.61).

We tweak our forecast to incorporate the additional 12.07% stake in PGIM ARF which was completed on 6 July 2020 as well as the loan facilities which were drawn down. We continue to favour FCT for its portfolio of necessity-spending driven suburban malls, and see both organic (catchment growth) and inorganic (acquisition of PGIM ARF asset) growth for FCT. DPU yield for FY20e/FY21e stands at 4.1%/5.9%.

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Natalie Ong
Research Analyst
Phillip Securities Research

Natalie covers the REITs and Property sector. Previously a business analyst with a management consultancy, she handled feasibility studies and business optimisation and restructuring projects. She has worked with companies from varied industries including logistics, FinTech, EduTech, gaming, F&B and retail. She graduated with a Bachelor of Science (Honours) in Banking & Finance from the University of London.

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