Frasers Centrepoint Trust (FCT) reported an inline set of 2QFY17 results. Gross revenue and NPI fell 2.9% and 3.3% YoY to S$45.7m and S$32.6m, respectively. This was largely due to loss of income from planned vacancies at Northpoint as a result of its ongoing AEI, with the mall’s occupancy at 60.7%, as at 31 Mar 2017.

However, DPU was unchanged YoY at 3.04 S cents as management opted to take 70.0% of its management fees in units (2QFY16: 50.0%), coupled with a smaller amount of income available for distribution which was retained.

Notwithstanding the headwinds facing Singapore’s retail sector, FCT managed to register solid rental reversions of 4.1% for its portfolio in 2QFY17, with only Bedok Point showing negative rental reversions.

Looking ahead, Northpoint’s occupancy is expected to trough in Apr at 57.0% before recovering gradually as the AEI nears completion. We will provide more details after the analyst briefing.

Maintain BUY and S$2.28 fair value estimate on FCT.

Source: OCBC Research - 25 Apr 2017