Frasers Centrepoint Trust (FCT) reported its 4QFY19 results which met our expectations. Gross revenue and NPI inched down 0.5% YoY to S$48.3m while NPI was flat (-0.1%) at S$32.8m.

If we exclude the effects of FRS 116 and 109 accounting adjustments, gross revenue and NPI would have increased 2.8% and 4.8% YoY, respectively.

DPU grew 1.8% YoY to 2.913 S cents. For the full-year, FCT’s NPI rose 1.5% to S$139.3m, while DPU grew 0.5% to a new high of 12.07 S cents, and this constituted 98.8% of our FY19 forecast.

Following the completion of the acquisitions in stakes of Waterway Point and PGIM Real Estate AsiaRetail Fund Limited, FCT’s gearing ratio increased from 23.5% (as at end-3QFY19) to 32.9%, but still a healthy level, in our view.

In terms of portfolio valuation, the cap rates adopted by the independent valuers remained unchanged, with the exception of Causeway Point, which saw an expansion of 5 bps due to a change in valuer. However, valuation for the property rose 6.6% to S$1,298m (S$3,090 psf on NLA).

Portfolio occupancy remained firm at 96.5% (-0.3 ppt QoQ), while 4QFY19 and FY19 rental reversions rose 3.9% and 4.8%, respectively. Shopper traffic grew 8.9% in 4QFY19, but tenants’ sales psf (period from Jun to Aug 2019) was flat YoY.

We will provide more updates after speaking with management. We currently have a HOLD rating and S$2.69 fair value on FCT.

Source: OCBC Research - 23 Oct 2019