Frasers Centrepoint Trust (FCT) reported its 2QFY16 results this morning which came in within our expectations. Gross revenue was down marginally by 0.8% YoY to S$47.1m but NPI rose 0.4% to S$33.7m due to lower utility tariff rates and write-back of provision for property tax as a result of resolved property tax appeals and objections.

DPU increased 2.6% to 3.039 S cents although management had retained S$1.1m of taxable income available for distribution (or 0.116 S cents per unit) in 2QFY16 (2QFY15: nil).

For 1HFY16, FCT’s gross revenue slipped slightly by 0.5% to S$94.2m and this made up 48.6% of our FY16 forecast. DPU of 5.909 S cents represented growth of 3.4% and formed 50.1% of our full-year forecast.

During the quarter, FCT delivered average positive rental reversions of 5.6%, with strong growth led by Changi City Point (+17.4%) and Causeway Point (+8.7%), but partially offset by Bedok Point (-26.9%).

Portfolio occupancy declined from 94.5% as at end Dec 2015 to 92.0% due largely to the commencement of AEI at Northpoint in March. We note that this AEI had previously been well communicated by FCT to the market. We will provide more details after the analyst briefing.

Reiterate our BUY rating and S$2.25 fair value on FCT.

Source: OCBC Research - 22 Apr 2016