• 2QFY15 DPU +2.9% YoY
• Positive rental reversions of 3.8% in 2QFY15
• Expect continued resiliency

2QFY15 results met our expectations

Frasers Centrepoint Trust (FCT) reported gross revenue of S$47.5m and DPU of 2.963 S cents for its 2QFY15 results. This represented YoY growth of 15.9% and 2.9%, respectively, driven largely by contribution from Changi City Point (CCP), which was acquired on 16 Jun 2014, and higher gross rents (+0.7%-5.0%) from all its other malls. For 1HFY15, FCT’s gross revenue jumped 17.1% to S$94.7m and formed 48.4% of our full-year forecast. DPU rose 6.2% to 5.713 S cents and constituted 48.4% of our FY15 estimate. If we take into account the S$1.4m (~0.15 S cents per unit) of income retained in 1QFY15, which we expect FCT to distribute in 2HFY15, adjusted 1HFY15 DPU would have formed 49.7% of our FY15 projection, well within our expectations.

Resilient performance, but signs of moderation

Management managed to achieve positive rental reversions of 3.8% for 2QFY15. This was, however, softer than the 7.7% and 6.5% rental reversion figures recorded in 1QFY15 and FY14, respectively. The main drag came from Bedok Point (BP), which registered a steep negative reversion of 31.4% due to one specific lease renewal. If we exclude BP, FCT’s rental reversion would have been 5.2%. Overall portfolio occupancy remained resilient at 97.1% (+0.7 ppt QoQ), as there were healthy improvements seen at Northpoint (+2.8 ppt to 99.1%) and BP (+3.4 ppt to 94.2%). The only decline came from CCP, which clocked in a slightly lower occupancy rate of 90.1% (versus 91.7% as at end 31 Dec 2014).

Maintain BUY

FCT, which is one of our top picks within the SREITs space, has experienced a 10.8% YTD appreciation in its share price, strongly outperforming the FTSE ST REIT Index’s 5.3% increase during the same period. Keeping our forecasts and S$2.27 fair value estimate on FCT intact, we still see potential total returns of 13.9%. Maintain BUY. We continue to like FCT for its strong balance sheet (gearing ratio of 28.6%; 87% of total debt hedged or on fixed rate basis) and defensive suburban malls portfolio.

Source: OCBC Research - 23 Apr 2015