SINGAPORE (Jan 23): OCBC Investment Research and Phillip Capital are maintaining their “buy” and “neutral” calls on Frasers Centrepoint Trust (FCT) with the respective fair value and price target of $2.50 and $2.21.

This comes post the release of the trust’s 1Q19 results which saw 1Q DPU grow 0.7% y-o-y to 3.02 cents, in line with both research houses’ expectations.

In a Tuesday report, OCBC analyst Andy Wong says he continues to like FCT for the strong rental reversions and improved occupancy shown over the latest financial quarter, driven by a robust rental uplift at Causeway Point and positive rental reversions at YewTee Point and Changi City Point.

While he sees the retirement of the manager’s CEO as a loss for FCT, he remains positive on the chairman’s emphasis at FCT’s AGM that there will be a smooth transition with Chew Tuan Chiong’s successor to be announced in due course.

“On the other hand, Anchorpoint, Bedok Point ad North Point City North Wing had negative rental reversions [in 1Q19],” notes Wong.

Similarly, Phillip Capital analyst Tara Wong sees Causeway Point and Changi City Point’s higher net property income (NPI) margins in 1Q as a positive, but remains cautious due to waning rental reversions for the latter asset as well as Northpoint’s North Wing.

 “Just over half of Changi City Point’s, and close to a third of Northpoint’s North Wing’s expiring leases (by GRI) for FY19 had been renewed in this first quarter alone, albeit on lower reversions of -1.3% and 1.9% respectively,” says Wong.

She also highlights how same-store tenant sales growth generally declined on-year from Sept-Nov 2018, with Northpoint’s North Wing being the exception.

“On the same note, occupancy cost inched up to 16.6% for FY18. This figure has crept up steadily over the past three years from 15.3% in FY15, in part due to Northpoint North Wings’ AEI,” adds the analyst.

As at 1:19pm, units in FCT are trading 1 cent lower at $2.26 or 1.09 times FY19E P/NAV, according to Phillip Capital estimates.