Frasers Centrepoint Trust - Stable delivery as expected

Still growing, albeit at a slow rate
4Q15 results are decent, with Frasers Centrepoint Trust (FCT) reporting an increase in income available for distribution and DPU by 0.9% and 2.7% respectively, largely in-line with our expectations. Causeway Point (CP) continued to anchor the portfolio, though Northpoint (NP) saw 26% increase in expenses due to one-off items and maintenance. Meanwhile, NAV increased from S$1.85 to S$1.91 per unit, largely due to valuation gains on CP.

Decent reversions dampened by lower occupancy
Good rental reversions continued to be recorded in 4Q15 for CP (7.2%), YewTee Point (8.4%) and Anchorpoint (14.7%), though Northpoint’s increase is lower at 2.0%. However, occupancy dipped to 96.0% on a portfolio level. Bedok Point (BP) remains a laggard (84.2%), and occupancy at Changi City Point (CCP) inched lower to 91.1%, with the management guiding occupancy for BP and CCP to remain around current levels in the near-term.

Asset enhancement at NP
AEI at NP is scheduled to start in Mar 2016, to be completed in phases over 18 months. The AEI is expected to be accretive, though exact details are not provided. The AEI will have a focus on enhancing shopper experience and comfort, boosting the diversity of retail offerings and to enable NP to integrate with Northpoint City.

Financing costs may be reduced further
S$278m bank borrowings will mature in the next 12 months, which we estimate is financed at ~3% interest costs. FCT indicated that these may be refinanced at lower rates, as its bankers are able to offer lower margins.

Technical Analysis
Daily Chart
Keeping a HOLD on 5.8% yield
We keep a HOLD call on FCT, with TP of S$2.03 unchanged. We see uncertainties over developments at BP as occupancy and rents may continue to decline while overall portfolio rental reversions are slowing. However, due to the recent decline in share price, we think the bias may be on the upside as shopper traffic and tenant sales have improved. Positive catalysts include stronger than expected reversion and occupancy at CCP, which stands to benefit from the completion of the MRT works. In addition, NP is slated to be rejuvenated, while the acquisition of Waterway Point may be in FCT’s cards. (Read Report)

Read Related Reports
1) Frasers Centrepoint Trust - FY15 broadly in line; stable reversions and tenant sales growth‏ by Credit Suisse Asia Pacific Equity Research, published on 23 October 2015

2) Frasers Centrepoint Trust - Steady 4QFY15 results‏ by OCBC Investment Research, published on 23 October 2015

3) Frasers Centrepoint Trust - Expected to ride out uncertainties next year by Phillip Securities Research, published on 23 October 2015

4) Frasers Centrepoint Trust - Northpoint a Growth Engine After AEI by RHB Research, published on 23 October 2015

5) Frasers Centrepoint Trust - Continues to deliver by CIMB Research, published on 22 October 2015

6) Frasers Centrepoint Trust - Rental reversions holding up by Daiwa Capital Markets, published on 22 October 2015

7) Frasers Centrepoint Trust - Hold: Consistent performer by HSBC Global Research, published on 22 October 2015

Source : KGI Fraser Research

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