Date of Report

October 27, 2024

Broker Name

Maybank Research Pte Ltd

Company Overview

Frasers Centrepoint Trust (FCT) is a real estate investment trust primarily investing in income-producing properties for retail purposes. The trust aims to enhance asset value through strategic initiatives and maintains a disciplined approach to its investment strategy.

Recent Performance

FCT reported a distribution per unit (DPU) of SGD 6.02 cents for the second half of the fiscal year, remaining flat both quarter-on-quarter (HoH) and year-on-year (YoY). The robust operating performance was underpinned by high committed occupancy and positive reversion in rents.

Financial Metrics

• Share Price: SGD 2.25
• 12-month Price Target: SGD 2.50 (+16%)
• Previous Price Target: SGD 2.55

Key Highlights

• Stabilizing Distribution: The trust has been maintaining stable financial metrics and asset values.
• Occupancy Rates: Retail portfolio occupancy remained high at 99.7%.
• Positive Rent Reversion: The full-year rent reversion was recorded at +7.7%.
• Tenant Sales Growth: Tenant sales grew by 0.6% YoY for the fourth quarter, indicating stability in sales despite some moderation from previous quarters.

Upcoming Developments

FCT has initiated an Asset Enhancement Initiative (AEI) for Hougang Mall, which is expected to add approximately 9% to net lettable area (NLA), improving the food and beverage space and community facilities. The AEI is projected to be completed between the second quarter of 2025 and the third quarter of 2026, with an investment of SGD 51 million.

Gearing and Financial Stability

• Gearing Ratio: Gearing decreased to 38.5% from 39.1% in the previous quarter.
• Cost of Borrowing: The cost of borrowing remained stable at 4.1%.
• Coverage Ratio: Improved to 3.41x from 3.26x, indicating better financial health.

ESG Initiatives

FCT has made significant strides in its Environmental, Social, and Governance (ESG) commitments. It achieved a 5-Star rating in the Global Real Estate Sustainability Benchmark (GRESB) for the fourth consecutive year and is working towards achieving net-zero carbon across all scopes by 2050.

Market Outlook

Despite the current slowdown in retail sales, FCT is positioned to benefit from its well-located malls and ongoing asset reconstitution strategies. The broker maintains a “BUY” rating on FCT, emphasizing its disciplined execution of strategies aimed at sustainable growth.

Risks and Challenges

Potential challenges include a prolonged slowdown in economic activity, which could affect demand for retail space, leading to lower occupancy rates and rental prices. Additionally, a rise in interest rates could increase the cost of debt, impacting profitability.

This summary provides a comprehensive view of Frasers Centrepoint Trust based on the information contained within the provided report.