Frasers Centrepoint Trust - Stable Performance But Still Recovering
- Frasers Centrepoint Trust (SGX:J69U)'s FY22 (Oct 2021 to Sep 2022) DPU of S$0.1223 hits a new high, surpassing pre-COVID DPU. Despite the absence of contribution due to the divestment of three of its malls in FY21, FY22 revenue and NPI grew 4.6%/4.9% y-o-y to S$356.9m/S$258.6m, lifted by the return of atrium income in Apr 22 and absence of rental rebates. See Frasers Centrepoint Trust's announcement dated 26 Oct 2022.
- Frasers Centrepoint Trust's NPI margins largely in line with pre-COVID levels as electricity costs were largely hedged till the end of FY22. 2H22 distributable income included S$3.1m or 65% of the S$4.8m retained in 1H22, retaining S$1.7m of distributable income in FY22.
- Retail occupancy improved 0.4/1.1ppts q-o-q/y-o-y to 97.5%, with 5 out of its 9 malls boasting occupancy above 99%. 3 of its assets continue to lag the recovery – Changi City Point continues to be impacted by reduced footfall in the Expo/Changi business park area while backfilling is in progress at Century Square and Central Plaza following the exit of mini-anchor tenants.
- Frasers Centrepoint Trust’s portfolio continues to recover, FY22 reversions came in at +1.5% (1H22: +1.7%) while tenant sales were 112.4% of pre-COVID levels in FY22. Occupancy cost remains healthy at 16.2% (vs. 17.0% in FY19), on the low end compared to its peers, leaving room to push rents.
- Going forward, we expect Frasers Centrepoint Trust's NPI margins to remain healthy albeit marginally lower y-o-y as built-in rental escalations and full-year operations of atrium space, which typically contributes ~3% to revenue, should mitigate higher utility costs.
- All-in cost of debt increased marginally 2.2% as at FY21 to 2.5% in FY22, interest rate hedge improved from 56% to 71%. Leverage dipped q-o-q from 33.9% to 33.0% but is expected to increase to ~35% post-acquisition of the additional 10% stake in Waterway Point in mid-1QFY23. Management articulated its disciplined approach towards portfolio reconstitution in light of the volatile macroeconomic environment and will evaluate acquisitions and divestments on a case-by-case basis.
- We introduce our FY25F and tweak our FY23F/24F DPU forecast for Frasers Centrepoint Trust by -2.1%/+1.3% as we pencil in the acquisition of the additional 10% stake in Waterway Point, assuming LTV of 100% and mid-1Q23 completion for the acquisition, as well as peaking interest cost and utility expenses in FY23F. Our DDM-based target price for Frasers Centrepoint Trust falls from S$2.75 to S$2.48 due to higher risk-free/COE assumptions.
- Frasers Centrepoint Trust's share price is trading at 6.0% FY23F DPU yield, +0.9 standard deviation of historical yield.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | https://www.cgs-cimb.com 2022-10-27 2022-10-27
Read also CGS-CIMB's most recent report:
2023-01-30 Frasers Centrepoint Trust - Reigniting The Acquisition Dream.
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