• 97% of Frasers Centrepoint Trust's tenants allowed to reopen doors during phase 2 of Circuit Breaker.
• Suburban giants in the best position to capture first flock of shoppers post Circuit Breaker (phase2).
• Rebound likely to be swift as these dominant malls contribute 75% of Frasers Centrepoint Trust’s revenues.
• Revised target price implies a 1.2x target P/BV.

Upgrade Frasers Centrepoint Trust to BUY, Target Price S$2.65

• The worst is likely over for local retail landlords as retail tenants can look to resume operations as early as the first week of July. Dominant suburban malls will likely lead the retail recovery, as the vast majority of Frasers Centrepoint Trust (SGX:J69U)’s tenants (97%) will be allowed to reopen their doors, from the current 30% that are still maintaining operations.
• Our revised target price implies a target P/BV ratio of 1.2x, and an implied FY20 target yield of 3.9%.

Where We Differ: Dominant Malls Located Within Large Residential Catchment Areas to Lead Recovery

• Frasers Centrepoint Trust’s portfolio of suburban malls will be in the best position to capture immediate shopper traffic and pent-up demand as retail malls reopen during phase 2 of post-Circuit Breaker measures. Rental revenues from suburban giants Northpoint, Causeway Point and Waterway Point contribute 75% of Frasers Centrepoint Trust’s annual revenue, of which about half of their tenants are in trade sectors we anticipate to recover swiftly.
• Moreover, additional support from the government and retail landlords announced in the Fortitude Budget should aid affected retailers in the reopening of their businesses.

PGIM Acquisition to Return to Spotlight in 2H20

• The acquisition of additional stakes in PGIM may be revisited at a more favourable capital-raising environment to ensure yield accretion to unitholders. Growth plans will continue to remain at the forefront of investors’ expectations, as we anticipate the acquisition to come back into focus in 2H20.

Singapore Retail REITs

• Frasers Centrepoint Trust - DBS Research 2020-05-29: Suburban Giants To Lead Retail Recovery.
• Lendlease Global Commercial REIT - DBS Research 2020-05-06: Steering Steady Amidst The COVID Storm.
• Mapletree Commercial Trust - DBS Research 2020-05-29: The Flower That Blooms In Adversity.
• SPH REIT - DBS Research 2020-05-29: It Pays To Be Prudent
• Starhill Global REIT - DBS Research 2020-05-29: Slowly But Surely.

Source: DBS Research - 29 May 2020