- Fully let mall, growing tenant sales and lower cost of debt were the key highlights of the preceding quarter. Hougang Mall AEI has received three quarters leasing pre-commitment and is on track for mid-to-high single digit return on capex. Commentary suggests 2H reversion is trending up.
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Business as usual.
- Frasers Centrepoint Trust's occupancy inched up to 99.9% (2Q 99.5%). Barring slight dip in NEX, all other malls saw occupancy flat-to-up. Tenant sales grew 4.4% (2Q +3.3%, 1Q +2.5%).
- Hougang Mall AEI commenced in April and is targeting completion by Sep next year. It has received 74% leasing pre-commitment with new-to-mall concepts onboard.
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Takeaways from post-result investor lunch.
- Management of Frasers Centrepoint Trust indicated 2H reversion is trending up (1H +9%). Debt cost guide is expected to trend down to mid 3% for next fiscal year. The group is looking at longer tenure (~5 years) of loans for subsequent refinancing.
- Management is looking at more AEIs to drive growth. Following AEI is likely to be for NEX with capex of ~S$80-100m, financed by existing JV resources. Commentary suggests construction costs based on tender prices are stable for now.
- Frasers Centrepoint Trust wants to be SG-focussed and further grow the portfolio but local assets are tightly held.
- Retail outlook remains steady with usual tenant churn. Store openings are almost as active as store closures and backfilling is fast. F&B, jewellery, beauty and education/enrichment are active categories. Cathay Cineplexes account for less than 1% of GRI and Frasers Centrepoint Trust has already provided for the debt. Management is exploring how to use the space.
Maintain BUY.
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