Analysts at UOB Kay Hian, CGS-CIMB Research, OCBC Investment Research and Maybank Securities are positive on Frasers Centrepoint Trust (FCT) on the back of improving shopper traffic and tenant sales.
In an April 28 note, the OCBC research team which has a “buy” call on FTC says the trust saw a firm rebound in its FY2021 DPU, back to FY2019 levels. This can be attributed to FCT’s portfolio of suburban malls in Singapore which are relatively defensive and resilient in nature.
“Looking ahead, we expect FCT to largely benefit from Singapore’s reopening drive, although more Singaporeans travelling overseas due to pent-up demand could also dampen shopper traffic to its malls, especially during the upcoming and June and December holiday periods,” the analysts add.
UOB KH analyst Jonathan Koh, who maintains a “buy” call on FCT, highlights that the trust has achieved positive rent reversion of 1.7% in 1HFY2022. Century Square recorded positive rent reversion of 8%, while Causeway Point, Waterway Point and White Sands registered positive rent reversion of 2%.
FCT’s tenant sales continued to improve with the easing of dining-in restrictions and seasonality to 104%-113% of pre-Covid levels in 2QFY2022. This is ahead of shopper traffic, which rose to 66%-69%, says Maybank analyst Chua Su Tye. “We expect tenants’ sales to gain traction in 2HFY2022 as restrictions ease and consumer sentiment improves,” adds Chua, who has a “buy” call on FCT.
The trust has a remaining 15.1% of leases to be renewed in FY2022. Lock, who has an “add” rating on FCT, believes that the trust will likely continue enjoying positive rental reversions going forward, with a healthy occupancy cost of 16.2% at end-1HFY2022. “Relaxation of Covid-19 measures in Singapore from Apr 26 should also provide some tailwinds for its Singapore retail portfolio performance,” says Lock.
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Koh concurs, adding that there is room for FCT to push for higher rents as retailers benefit from the easing of safe distancing measures. He notes that FCT will focus on replacing weak tenants with refreshed offerings that are more relevant and attractive to consumers.
In terms of balance sheet, FCT has conservative capital management, says Koh. The aggregate leverage was low at 33.3% as at Mar 22 while the average all-in cost of debt remains stable at 2.2%.
Remaining focused on Singapore, FCT will continue to look for opportunities to increase revenue in its malls and drive omnichannel to increase sales productivity, Lock says. “It will also explore acquisition and AEI opportunities and engage prime suburban malls’ owners for potential collaborations.
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“We continue to like FCT for its pure exposure to suburban malls which should enable it to outperform peers,” adds Lock.
UOB KH, CGS-CIMB, and OCBC have trimmed their DPU estimates slightly post FCT’s results announcement. Koh’s target price is lowered to $2.96 from $2.98, while Lock has raised her target price to $2.75 from $2.73. Chua has kept his target price at $2.90, while OCBC has lifted its fair value estimate to $2.73 from $2.67.
As at 2.43pm, units in FCT are trading 2 cents higher or 0.8% up at $2.45.
