RHB analyst Vijay Natarajan is keeping his “neutral” call and $2.40 price target on Frasers Centrepoint Trust, with a 2% downside seen.
The retail industry continues to face pressure, but FCT, which owns the second largest portfolio of suburban malls, is well diversified and to weather the challenges.
However, at 1.1 times and 5% yield for the year ending Sept 21, Natarajan does not see valuations compelling.
With Singapore moving into Phase 3 from Dec 28, the capacity limit for malls and large standalone stores will be increased from 10 sq m per person to 8 sq m per person, suggesting room for further recovery.
For now, he notes that tenant sales have recovered close to pre-Covid levels but recovery is uneven across sectors. Supermarkets, sporting goods, certain food & beverage and wellness sectors faring much better than the rest.
Overall sales across the malls are down just 1.8% y-o-y, which outperforms the drop of 8.6% y-o-y seen across Singapore.
“This uneven recovery, in our view, is likely to pose challenges for landlords in terms of curating malls tenant mix, resulting in higher vacancies and lower rents. We expect overall occupancy in low 90% for FY21 from 94.9% as at the end of September, with flattish rent reversions,” writes Natarajan.
As at noon break today, FCT traded at $2.51, up 10 cents.
