SINGAPORE (July 29): Frasers Centrepoint Trust (FCT) delivered a strong set of results in 3Q19, despite seeing a dip in DPU due to an enlarged unit base.

See: Frasers Centrepoint Trust 3Q19 DPU falls 1.7% to 3 cents

The 3Q19 results were supported by strong operational metrics, reflecting broad-based occupancy improvements and tenants’ sales growth.

In particular, of all the malls owned by FCT, only YewTee Point reported a decline in rental reversion of 2.5%.  Causeway Point, Bedok Point and Anchorpoint registered 4.1%, 8.1% and 3.7% rental reversions respectively, while Northpoint City North Wing and Changi City Point’s rental reversions stayed unchanged.

Shopper traffic also improved 6.1% in 3Q19, while tenant sales psf bucked Singapore’s recent weak retail sales trend by rising 2.9% y-o-y, reinforcing its identity as a resilient suburban mall player.

Portfolio occupancy remained high at 96.8%, up from 96% in the previous year. Except for Anchor Point which reported a flat occupancy rate of 95%, all other malls experienced higher q-o-q occupancy rates.

Looking ahead, analysts is calling FCT their “preferred retail REIT”.

Two-thirds of the 34.3% of total leases by net leasable area (NLA) to be renewed are concentrated at Causeway Point and Northpoint City North Wing, two of FCT’s largest and best performing malls.

Maiden contributions from Waterway Point is also expected to kick in from 4Q19.

In addition, FCT is attempting a strategic diversification to strengthen its growth profile – by gradually increasing its stake in PGIM’s AsiaRetail fund.

See: Frasers Centrepoint Trust acquires 17.1% stake in PGIM Real Estate AsiaRetail Fund for $342.5 mil

See: Frasers Property and FCT raise stakes in PGIM Asia retail property fund for $635 mil

Prior to this, all of FCT’s properties were suburban malls, which resulted in a lack of balance in terms of rent outlook, although they displayed resilience across market cycles.

See: Frasers Centrepoint Trust poised to ride on popularity of suburban retail malls, analysts say

In anticipation of possible near-term fluctuations arising from the recent acquisitions, FCT is retaining some $1.86 million to help smoothen the group’s distribution profile as it transitions to the next stage of growth. 

In addition, FCT is seeking inclusion in the EPRA NAREIT Developed Asia Index in September – which identifies property firms with strong sustainability performances.

This will raise FCT’s visibility among investors and potentially translate into a re-rating catalyst, say experts.

DBS Research Group, Maybank KimEng and CGS-CIMB Research are all maintaining their “buy” calls on FCT, with target prices of $2.95, $2.80 and $2.79 respectively.

Units in FCT closed 1 cent lower at $2.67, or 1.2 times book value and implying a dividend yield of about 4.5%.