• 1Q20 NPI and DPU in line with our forecast.
• Positive rental reversions of 5% for 1Q20. Revenue growth supported by continued positive rental reversions and improved occupancy
• Maintain ACCUMULATE with an unchanged TP of S$3.11. FCT is a beneficiary of necessity spending and the intensification of Woodlands and Punggol.

The Positives

+ Positive rental reversions across all assets with average portfolio reversions of 5.0% for 1Q20 (FY19 +4.8%). FCT’s largest revenue contributor, Causeway Point (CWP), registered highest rental reversions (+7.1%). Reversions for the rest of the assets ranged from 2.7% to 5.1%.

+ Portfolio occupancy improved 80bps/110bps QoQ/YoY. Occupancy at CWP rebounded by 0.8% 97.8% due to commencement of F&B tenants’ operations on completion of underground pedestrian link (UPL) in Dec 2019. Anchorpoint also saw a boost in occupancy from 79.0% to 93.5% due to commencement of trading of new anchor tenant, Mr DIY, in Nov 2019. FCT’s smaller malls, Bedok Point and YewTee Point, have also improved their occupancies by 11.5ppts and 3.2ppts respectively over the last four quarters.

The Negatives

– Tenant sales per sq ft fell 0.5% YoY. Lower tenant sales were transitional due to the absence of contribution from high-sales F&B tenants at CWP UPL. 1Q20 recorded less than 1 month of sales from the F&B tenants that commenced operations in Dec 2019.

Outlook

Performance at FCT’s larger malls, NPNW, CWP and WWP, are expected to improve catchment size and connectivity increases, attributed to the progressive opening of the Thomson-East Coast Line and increased vibrancy brought about by the new universities (SIT), offices and residential population in the vicinity.

In light of the proposed CMT-CCT merger, management commented that they would not be actively looking to acquire office assets. However, if the target mall has a component of office (such as Tiong Bahru Plaza in the PGIM portfolio), they may still consider the asset. However, the management highlighted that they would not rule out assets with office components attached to the mall acquisitions (such as Tiong Bahru Plaza in the PGIM portfolio).

Maintain ACCUMULATE with and unchanged TP of S$3.11.

Our target price translates to a FY20e/FY21e distribution yield of 4.5%/4.9% and a total upside of 12.9%.

Source: Phillip Capital Research - 29 Jan 2020