From Guha's perspective, FCT is seen to deliver a combination of attractive valuation, resilient retail sales, underpinned by a quality portfolio and a potential beneficiary of rotation of fund flows.

Since the downgrade in April 27, FCT's unit price has dropped by 5%, to trade at 0.93x P/B and delivering a yield of 5.55%, and is 1 sd below its historical mean.

FCT is the largest suburban retail landlord, with its portfolio of ten malls worth $6.9 billion.

"We think this is attractive given the high quality portfolio of retail malls located next to transport nodes and dense population catchments," writes analyst Krishna Guha in his July 4 note.

"Given the focus on necessary shopping and the current low unemployment rate, we expect operating metrics to be stable resulting in a stable distribution profile," he reasons.

<span class='see_also_inread'><b>See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/brokers-calls/rhb-pegs-isoteams-tp-5-cents-after-rights-issuance?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>RHB pegs ISOTeam’s TP at 5 cents after rights issuance</a></b></span>

As of 1HFY2023, FCT's monthly tenant sales are 14% higher on average than pre-pandemic levels.

In addition, Guha believes that fund flows may rotate to domestic-focused counters such as FCT, after visitor arrivals dipped in May, and hospitality REITs have outperformed in Q2.

Guha's unchanged target price of $2.35 is is based on a dividend discount model factoring in 6.6% cost of equity.

As at 10.40am, FCT was up 2 cents to change hands at $2.19.

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RHB pegs ISOTeam’s TP at 5 cents after rights issuance

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