<Alert!> Frasers Centrepoint Trust 3Q22 Update – Record shopper traffic since the pandemic
- Operational results robust; tenants sales-led recovery to drive DPU for FY22
- Key positives: (i) Tenant sales continue to outperform at c.110% above pre-COVID levels, improvement q-o-q (ii) Shopper traffic reaches a record high of 79% this quarter, (iii) Ancillary income that contribute c.10% to topline historically to flow through more strongly alongside a pick up in shopper traffic
- Key negatives: (i) Exit of an anchor tenant at Century Square led to a 10% decline in mall occupancy in the quarter but a replacement has been found
- FCT continues to feature strongly as our top retail pick; Maintain BUY with current TP of S$2.80
(+) Operating metrices continue to improve with shopper traffic reaching a new high
- Portfolio tenant sales continue to improve q-o-q, improving from c.104% of pre-COVID levels in 1H22 to c.110% this quarter.
- Shopper traffic has noticeably moved up to 80% of pre-COVID levels this quarter, a new high since the pandemic.
- Portfolio occupancy declined c.0.6ppt to 97.1% due to the exit of an anchor tenant, Filmgarde at Century Square.
- Large dominant malls such as Northpoint City, Waterway Point and Causeway Point continue to register near full occupancies above 99%.
- c.5.3% of leases by GRI remains up for renewal for the last quarter of FY22.
- We understand that rental reversions for leases signed in the quarters were positive and comparable to 1H levels at +1.73%.
(+) Strong leasing demand with supermarket tenant DonDonDonKi opening doors at Northpoint City
- Suburban retail demand continue to look up alongside an easing of relaxation and pick up in shopper traffic.
- Changi City Point is seeing a pick up in sentiments as workers return to work at the Changi Business Park precinct.
- FIlmgarde’s vacated space is currently in advanced negotiation with another cinema operator for takeover, to potentially bring up occupancy at that mall in the next quarter.
- FCT has also seen the expansion of supermarket and grocer segments with new tenants such as Don Don Don Ki to come in as an anchor tenant at Northpoint City.
- Tenant retention remains stable at 70-80%.
- Vacated space at FCT’s Central Plaza (adjacent to Tiong Bahru Mall) which comprised of 3 vacant levels has been subdivided into smaller plots to lease. FCT is currently in talks with prospective office tenants for the space.
- With a pick up in tenant sales, we expect GTO component of rent that historically make up 4-5% of topline to improve.
- The return of shopper traffic will also add upside to ancillary income for FCT (including car park income), which typically contribute c.10% of topline prior the pandemic.
(+/-) Rising interest cost partly mitigated by high fixed debt hedging
- Leverage ratio remains stable at 33.9% as at 30th June 2022.
- Approximately 69% of debt are hedged on fixed rate.
- Proportion of green loans as a percentage of total borrowings increased from 22% to 32% q-o-q.
- Interest cost creeped up 20bps q-o-q to land at 2.4%.
- FCT expects interest cost to creep up further to land around 2.5% in the coming 2 quarters.
FCT continue to feature strongly as our top retail pick, our current TP stands at 2.80.