Frasers Centrepoint Trust - OCBC Investment 2024-04-26: Buoyant Operating Metrics

• Frasers Centrepoint Trust (SGX:J69U)’s 1HFY24 gross revenue and net property income (NPI) fell 7.2% and 8.4% y-o-y to S$172.2m and S$124.6m, respectively, largely due to the absence of income from the divestment of Changi City Point and ongoing asset enhancement initiative (AEI) at Tampines 1.
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1HFY24 DPU fell 1.8% y-o-y but was in-line with our expectations

• Given the jump in finance costs by 16.6% and an enlarged unit base from a private placement exercise, 1HFY24 Frasers Centrepoint Trust's DPU fell 1.8% y-o-y to 6.022 Singapore cents. This accounted for 50.5% of our initial FY24 forecast, which we view as within our expectations.

Retail portfolio committed occupancy maintained at 99.9%, solid rental reversions of 7.5% achieved for retail assets

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• Although figures for NEX were not disclosed (confidentiality as mall is not solely owned by Frasers Centrepoint Trust), management highlighted that rental reversions were strong and above the average of its retail portfolio.
• We see further upside for Frasers Centrepoint Trust’s latest acquisition, as NEX has ~60k square feet of net lettable area which can potentially be reconfigured into income generating retail space, although the process will take time.
• Overall retail portfolio tenants’ sales and shopper traffic grew 4.3% and 8.1% y-o-y in 2QFY24, with healthy occupancy costs supporting Frasers Centrepoint Trust’s push for further positive rental reversions, in our view.
• The AEI at Tampines 1 is on track for completion before the end of FY24, and Frasers Centrepoint Trust is targeting a return on investment (ROI) of approximately 8%.

Aggregate leverage ratio increased to 38.5%; all-in cost of borrowing inched down to 4.2%

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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2024-04-26 SGinvestors.io

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