• 1QFY19 DPU +0.7% YoY
• Rental reversions +6.9%
• CEO to retire

1QFY19 Results In-line With Our Expectations

Frasers Centrepoint Trust (FCT) reported its 1QFY19 results which met our expectations. Gross revenue increased 2.9% YoY to S$49.3m while property operating expenses increased at a faster clip of 3.7% due to higher marketing expenses and carpark expenses for Anchorpoint. These culminated in a 2.5% YoY growth in NPI to S$35.4m, or 24.5% of our FY19 forecast.

DPU rose 0.7% YoY 3.02 S cents, as FCT chose to take 20% of its management fees in units (1QFY18: 50%), while there was also a slight boost from a payout of S$330k of taxable income available for distribution which was retained previously. 1QFY19 DPU formed 24.7% of our full-year forecast.

Strong Rental Reversions and Occupancy Improvement

Two of the positive highlights from the quarter came from FCT’s strong positive rental reversion of 6.9% and improved occupancies across all its properties (overall +1.7 ppt QoQ to 96.4%). The former was led by Causeway Point, which delivered a robust rental uplift of 11.1% and this was for a sizeable 19.8% of the mall’s NLA. This was in turn driven by a strong rental reversion from an anchor tenant.

YewTee Point and Changi City Point also clocked in positive rental reversions of 5.4% and 1.9%, respectively. On the other hand, Anchorpoint (-12.1% due to a replacement tenant with a lower rental than the previous tenant), Bedok Point (-2.8% for 1.9% of the mall’s NLA) and North Point City North Wing (-1.3% for 4.0% of the mall’s NLA) had negative rental reversions.

CEO Expressed His Intention to Retire by End-2019

Separately, FCT announced that its CEO Dr Chew Tuan Chiong, had informed the Board of his intention to retire as CEO before the end of 2019. Dr Chew, who will be turning 62 years old this year, joined FCT as CEO in 2010 and was instrumental in continuing FCT’s strong track record of growing its DPU every financial year since he joined the helm.

While we clearly see Dr Chew’s retirement as a loss for FCT, its Chairman highlighted during the AGM that there will be a smooth transition and a successor will be announced in due course. We keep our fair value of S$2.50 for now.

Source: OCBC Research - 22 Jan 2019