• 4QFY15 DPU +2.7% YoY
• Positive rental reversions of 6.3% for FY15
• AEI on Northpoint to commence in Mar 2016

4QFY15 results met our expectations

Frasers Centrepoint Trust‟s (FCT) 4QFY15 gross revenue grew 1.7% YoY to S$47.5m, while DPU rose 2.7% to 2.859 S cents. This was within our expectations. For FY15, FCT‟s gross revenue and DPU increased 12.1% and 3.8% to S$189.2m and 11.608 S cents, respectively, and constituted 98.6% and 98.9% of our full-year forecasts.

Positive rental reversions of 7.1% were recorded in 4QFY15, bringing the average portfolio rental reversion to 6.3% for FY15 (FY14: 6.5%). Only Bedok Point saw negative rental reversions of 6.4% in FY15. Occupancy was down marginally by 0.5 ppt QoQ to 96%, as at 30 Sep 2015. However, shopper traffic was up 8.2% YoY in 4QFY15, while tenants‟ sales grew 2.1% YoY for the 3-month period ended Aug 2015. Another positive sign came from the slight decline in occupancy costs for FCT‟s portfolio to below 16% in FY15.

Earmarking AEI at Northpoint

Looking ahead, FCT has earmarked an AEI at Northpoint Shopping Centre. This is aimed at boosting the diversity of its retail offerings and to enable the mall to benefit from the integration with the upcoming retail component of Northpoint City by its sponsor Frasers Centrepoint Limited.

The AEI would commence in Mar 2016, but management highlighted during the briefing that details such as the capex requirements and impact on operations will only be available in due course. However, FCT did mention that it is targeting an ROI in the doubledigit range for this project. Given FCT‟s low gearing ratio of 28.2%, we expect the AEI to be financed comfortably by debt.

Maintain BUY

We lower our DPU forecasts for FY16 by 1.9%, as we input more conservative occupancy rate and NPI margin assumptions in our model. We also introduce our FY17 projections. As we roll forward our valuations, our DDM-derived fair value estimate increases slightly from S$2.24 to S$2.25. Reiterate BUY on FCT, as we continue to like its resilient portfolio, healthy balance sheet and attractive FY16F distribution yield of 5.9%.

Source: OCBC Research - 23 Oct 2015