SINGAPORE (July 25): RHB and CIMB are maintaining their “buy” rating on Frasers Centrepoint Trust (FCT) with a target price of $2.22 and $2.34 respectively.

This is despite a 1.3% decline y-o-y in its DPU for 3Q17 to 3 cents and a 3.3% y-o-y decline in its revenue for the same period.

See: Frasers Centrepoint Trust 3Q DPU falls 1.3% to 3 cents on impact of Northpoint AEI

The trust attributed this decline to lower contributions from Northpoint, which is currently undergoing an asset enhancement initiative (AEI).

In a Tuesday report, RHB analyst Vijay Natarajan says, “With bulk of AEI work completed, occupancy is projected to increase ~73.5% for the current quarter and further stabilise with the expected completion of the AEI in September.”

Meanwhile, CIMB analyst Lock Mun Yee says, “As it moves past the peak of AEI for Northpoint, we believe earnings could likely bottom out over the next two quarters.”

With bulk of near-term leases at Causeway Point (CP), Lock says CP should continue to achieve higher rents, given its strategic location and more optimal tenant mix.

Shopper traffic and tenant sales have been picking up in Changi Point City, following the relocation of its food court. Natarajan predicts this will further improve after the opening of the Downtown Line 3 in October.

With a modest gearing of 30%, FCT is maintaining a healthy debt headroom of about $500 million, as the trust’s management actively looks out for acquisition opportunities, mainly in Singapore and Australia.

“Its low gearing also provides headroom for an opportunistic acquisition-led growth in the near-term,” says Natarajan.

Units in FCT are trading 3 cents lower at $2.11 as of 9.43am.