Frasers Centrepoint Trust Earnings: Retail Portfolio Metrics Remain Robust

Frasers Centrepoint Trust’s, or FCT’s, first-half fiscal 2024 (ending September) net property income fell 8.4% year on year to SGD 124.6 million, below our expectations and only making up 46.8% of our full-year estimate. The miss was largely due to lower-than-expected contributions from Tampines 1 mall, which is undergoing asset enhancement initiative. This was offset by lower-than-expected financing cost as the trust paid off higher interest rate debts using proceeds from the equity fund raising exercise in February 2024 and divestment of Changi City Point and Hektar REIT in October 2023 and December 2023, respectively. As such, first-half distribution per unit, or DPU, of SGD 0.06022 remains in line with our estimate. We fine-tuned our leasing and debt assumptions and lift our DPU estimates for 2024-26 by 0.8%-2.5%. Our fair value estimate of SGD 2.42 per unit remains unchanged. Based on current price, the trust trades at a fiscal 2024 distribution yield of 5.6%. Although the trust screens as undervalued, our preference among Singapore REITs is Keppel REIT, which trades at a more attractive distribution yield of 6.8%.