<Alert!> Frasers Centrepoint Trust 1H22 results – First class tickets on the reopening train
- 1H22 DPU of 6.136 Scts in line with full year estimates post income retention
- Key Positives: (i) Record high occupancy at 97.8%, (ii) Positive reversions across the board at +4.12%, (iii) Further upside with NPI margin with utilities cost hedged towards mid-23
- Datapoints to look out for: (i) improvement in transient traffic beyond the current range of 60-70% of pre-COVID levels with further relaxation news, (ii) GTO income and other mall income to flow through more strongly in 2H22
- Maintain BUY with unchanged TP of S$2.90
Results Summary
| Summary of results | 1H22 | 2H21 | % q-o-q | 1H21 | %y-o-y |
| Revenue (S$m) | 176.19 | 167.54 | 5.2% | 173.62 | 1.5% |
| NPI (S$m) | 130.48 | 120.91 | 7.9% | 125.66 | 3.8% |
| DI (S$m) | 104.41 | 103.6 | 0.8% | 101.1 | 3.3% |
| DPU (Scts) | 6.136 | 6.09 | 0.8% | 6 | 2.3% |
| Key Financial Metrics | 1H22 | 2H21 | % q-o-q | 1H21 | %y-o-y |
| Gearing | 33.3% | 33.3% | 0 ppt | 35.9% | -2.6 ppt |
| Average cost of debt | 2.20% | 2.20% | 0 ppt | 2.40% | -0.2 ppt |
| ICR (x) | 5.7 | 5.1 | 0.6 | 5.0 | 0.8 |
| WADE (yrs) | 2.1 | 2.5 | (0.4) | 2.1 | (0.0) |
| Key Operational Data | 2H21 | % q-o-q | 1H21 | %y-o-y | |
| Portfolio occupancies | 97.8% | 97.3% | 0.5% | 94.9% | 3% |
| Rental reversions (%) | 2% | -0.6% | n.a. | n.a. | – |
| WALE (years, GRI) | n.a. | 1.64 | – | 1.53 | – |
| Tenant sales (% pre-covid) | 103.9% | 98.0% | 96.4% | ||
| Shopper traffic (% pre-covid) | 62.3% | 57.5% | 61.8% |
1H22 DPU of 6.136 Scts in line with full year estimates post income retention
- FCT reported 1H22 revenue of S$176.2 (+1.5% y-o-y) and NPI of S$130.5 (+3.8% y-o-y)
- The strong growth in topline was due to full six-month contribution from ARF acquisition, and partially offset by divestments made in the period.
- Distributable income rose 3.3% y-o-y to S$104.41.
- Correspondingly, DPU for the period rose 2.3% yo-y to 6.136 Scts.
- This is post income retention of S$4.8m from distributable income this period.
- This is in line with our full year estimates at S$358.5m and DPU of 12.71 Scts.
Retail occupancy hits record high at 97.8%, NPI margins to potentially strengthen further
- Occupancy improved from 97.2% to 97.8% this quarter
- Positive reversions at +1.73% (incoming vs outgoing) and +4.12% (average vs average).
- This was generally across the board with the exception of Changi City Point which registered a -3.63% reversion.
- NPI margins improved 1.2% y-o-y to 74.9%
- Margins should hold up strong as we expect incremental topline rents from other income components (GTO rents, carpark, atrium sales etc) in 2H22 that typically make up 10% of revenues pre-COVID.
- On the operational front, FCT expects savings from a relaxation of costs associated to adhere to covid regulations, and incremental costs associated with utilities hike (bulk of impact to be felt in mid-23).
Two strides ahead in relaxation to reflect more strongly in 2H22 numbers
- Retail sales has surpassed pre-COVID levels at c.104% of pre-COVID levels.
- Shopper traffic continues to hover within the band of 60-70% of pre-COVID levels.
- The recent announcements that full restrictions on work-from-office limits has been lifted should bode well for the improvement in transient traffic flow into retail malls.
- Portfolio occupancy cost has compressed to 16.2%, at levels on pare with pre-COVID basis and an improvement from occupancy cost in the pandemic year 2020 at 19.2%.
- This implies that the recovery in underlying tenant sales has outpaced recovery in rents.
- This alongside recent strong moves in relaxation should put landlords in a position of greater bargaining power in upcoming lease renewals.
Capital management remains robust
- Aggregate leverage remains robust at 33.3% with interest cover
- Interest cost remains stable q-o-q at 2.2%.
- Every 50 bps in SOR is estimate to impact DPU by 0.169 Scts based on portion of unhedged interest rate at c.30% (post refinancing in Apr’22).
- FCT continues to eye acquisition opportunities closely. We understand that there remains a key shareholder at WWP with a 20% stake, which could potentially be an opportunity to FCT to acquire an additional 10% stake on a pro-rata basis.
Maintain BUY with current TP of S$2.90