SINGAPORE (Jan 22): Maybank Kim Eng is maintaining its “buy” call on Frasers Centrepoint Trust (FCT) with an unchanged target price of $2.55 after the trust’s manager reported a 1Q19 DPU of 3.02 cents, up 0.7% on-year due to improved occupancies across all of its assets and positive rental reversions.
See: Frasers Centrepoint Trust posts 0.7% higher 1Q DPU of 3.02 cents
The research house is remaining “positive” on the Singapore REITs (S-REITs) sector with a preference for hospitality and industrials for growth & yield catalysts, while FCT is its preferred retail play in the S-REITs space.
In a Tuesday report, analyst Chua Su Tye says he continues to like FCT for its compelling DPU yield of 5.7%, strengthening suburban mall footprint, visible growth drivers, potential acquisition catalysts and strong balance sheet.
Looking ahead, he sees strong leasing momentum to support renewal efforts into the remainder of FY19, with 46% of lease expiries due at Causeway Point (CWP) which saw the strongest reversions in the latest quarter under review.
Chua also anticipates improving shopper traffic at Northpoint City North Wing (NCNW) post its asset enhancement initiative (AEI), given the asset’s increasing relevance as a destination mall.
This was demonstrated by FCT’s Changi City Point (CCP) asset, recalls the analyst, as it saw improved occupancies after its successful repositioning as an outlet mall, as well as increased shopper traffic with the opening of the Expo Downtown Line station.
“We continue to see larger destination malls demonstrating more defensive attributes against e-commerce competition,” he adds.
As for FCT’s manager, the analyst is expecting a new CEO to succeed Chew Tuan Chiong, who announced his intention to retire at the latest AGM.
“The growth strategy will remain unchanged in our view, and investors can look forward to FCT’s next growth phase,” says Chua.
As at 11:13am, units in FCT are trading flat at $2.26 or 1.1 times FY19E book value.
