SINGAPORE (July 25): Analysts are keeping their positive outlooks on Frasers Centrepoint Trust (FCT) after the REIT saw its distribution per unit (DPU) climb 1.8% y-o-y to 3.053 cents for the 3Q18 ended June.
“Despite coming off its seasonally strongest 2Q, FCT continued to deliver strong operating performance in 3Q18,” says DBS Group Research lead analyst Carmen Tay in a flash note on Wednesday.
DBS is keeping its “buy” call on FCT with an unchanged target price of $2.45.
Gross revenue for 3Q18 was up 10.9% y-o-y to $48.3 million on higher contributions from the three larger malls in the portfolio – Northpoint City North Wing (NCNW), Causeway Point (CP), and Changi City Point (CCP).
Net property income (NPI) for 3Q18 grew 13.7% to $35.0 million, as revenue growth for the quarter outpaced the 4.3% increase in property expenses.
See: Frasers Centrepoint Trust declares 1.8% higher 3Q DPU of 3.053 cents
“We expect the larger malls to continue driving growth with higher footfall, occupancy rate, and rental reversions,” says CGS-CIMB Research lead analyst Eing Kar Mei in a report on Tuesday.
CGS-CIMB is maintaining its “add” recommendation on FCT with an unchanged target price of $2.41.
Meanwhile, FCT has announced a 10-month asset enhancement initiative (AEI) at Causeway Point, which is scheduled to commence at end-Feb 2019.
The way DBS’ Tay sees it, this could lead to further upside in the medium term.
“Apart from transient effects arising from this initiative, we might see possible loss of GFA (gross floor area),” she says. “We are however positive on this move given longer-term benefits.”
At the same time, CGS-CIMB’s Eing notes that FCT is also seeing higher shopper traffic at its larger malls.
“CP and CCP’s traffic increased by an average of 5% y-o-y while traffic for Northpoint City increased by nearly double-digits as the trust combined the traffic of North and South Wing,” she says.
On the other hand, traffic from FCT’s three smaller malls – Bedok Point, Yishun 10, and Anchor Point – saw a decline in shopper traffic. Overall, portfolio shopper traffic, excluding NCNW, was up 1.2% y-o-y.
“We continue to like FCT for its exposure to the more stable non-discretionary retail segment,” Eing says.
Units of FCT closed 5 cents lower, or down 2.2%, at $2.22 on Wednesday. According to CGS-CIMB valuations, this implies an estimated price-to-earnings ratio of 19.5 times and a dividend yield of 5.4% for FY18.
