Despite diverging views on Frasers Centrepoint Trust (FCT), DBS Group Research remains positive on the counter, with an unchanged ‘buy’ rating and target price of $3.
DBS analysts Geraldine Wong and Derek Tan believe that FCT’s portfolio of suburban malls anchors its ability to continue delivering growth and stability, in contrast to views on the street that suburban malls’ performance will see a dip when workers gradually head back to offices in the coming months.
The analysts project FCT’s distribution per unit (DPU) in FY2021 ending September to be around 4% higher than pre-Covid-19 levels, ahead of its peer growth rate. Their target price of $3 implies a target yield of 4.2%.
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Wong and Tan are upbeat on FCT’s portfolio as they believe flexible work arrangements will see workers spend more time at home or in suburban office locations, which will drive traffic to suburban malls.
“We see the REIT further integrating itself in the retail ecosystem through the launch of its Frasers App and ‘Makan Master’ which we believe will capitalise on the future trend of online food delivery,” they add.
They also believe FCT has sharpened its portfolio following its divestments of Bedok Point, Anchorpoint, and Yew Tee Point, and is now focused on resilient "dominant malls" with good operational scale that can sustain traffic and tenant sales.
Retail sales in 4QFY2020 narrowed to approximately 3% below normalised levels, which Wong and Tan believe can be sustained into 1H2021, given that the majority of FCT’s trades are within essential services.
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“We expect the phase 3 reopening of the Singapore economy to boost its portfolio performance, especially when rules may be relaxed for atrium sales and higher group sizes to drive sales in the food and beverage space,” the analysts say.
In addition, they point out that FCT has more deals in the pipeline with the prospective acquisition of Northpoint City South Wing and further stakes in Waterway Point on the horizon.
As at 3.14pm, shares in FCT are trading 3 cents or 1.2% higher at $2.53.
