• 3QFY17 DPU down 1.3 YoY
• Slight positive rental reversion of 0.4%
• Occupancy expected to pick up

3QFY17 Results In-line With Our Expectations

Frasers Centrepoint Trust (FCT) reported an inline set of 3QFY17 results. Gross revenue fell 3.3% YoY to S$43.6m and this was largely attributed to the loss of income from the ongoing AEI at Northpoint. NPI declined by a smaller 1.3% magnitude to S$30.8m due to the write-back of provisions of property tax. DPU also declined by 1.3% YoY to 3.00 S cents, as S$1.4m of taxable income available for distribution which was retained in 1HFY17 was paid out during the quarter, versus S$2.1m of such income which was paid out in 3QFY16.

Excluding this impact, FCT’s DPU would instead have increased by 1.5% YoY. For 9MFY17, FCT’s gross revenue and NPI came in lower by 4.2% and 3.5% to S$133.3m and S$95.0m, respectively. DPU of 8.93 S cents represented a mild decline of 0.2%, and formed 75.6% of our FY17 forecast.

Decline in Shopper Traffic and Tenants’ Sales Moderated

FCT’s portfolio occupancy held firm at 87.1% (- 0.1 ppt QoQ), as at 30 Jun 2017. Northpoint’s occupancy stood at 64.8%, due to the AEI as highlighted earlier. This is expected to be completed in Sep this year. Management has projected the mall’s occupancy to range between 69.1% to 79.0% from Jul to Sep, and is seeking to achieve an occupancy of at least 95% by the end of the year given keen interest from prospective tenants.

Although Changi City Point’s occupancy fell 5.7 ppt QoQ to 84.0%, this was attributed to the fitting out of a food court tenant. Occupancy has since improved to 87.4% following the commencement of operations on 1 Jul. There was still some softness in overall portfolio shopper traffic (-2.8% YoY to 23.9m) and tenant sales (-5.9% YoY for the period from Mar to May 2017), but the dip was moderate when compared to the preceding quarter.

Excluding Northpoint, FCT’s shopper traffic grew 3.7% YoY while tenants’ sales fell 3.3% YoY. Rental reversions for 3QFY17 came in at 0.4% due to the drag from Bedok Point (-30.2%). Excluding Bedok Point, portfolio rental reversion was 5.4%.

Maintain BUY

We update our model to incorporate more conservative occupancy and rental assumptions, but as we also lower our borrowing cost forecasts, our DPU projections remain largely intact. Maintain BUY and S$2.28 fair value estimate.

Source: OCBC Research - 25 Jul 2017