Causeway Point to drive Frasers Centrepoint Trust’s growth in 2012

• A complete makeover of Causeway Point. We came away from our site visit to Causeway Point pleasantly surprised at the extent of the changes arising from the asset enhancement initiative, which has resulted in close to 70% new and upgraded shops. The mall was crowded when we visited on the weekend and shoppers did not seem deterred by the ongoing renovation works. Net property income growth is on track to meet the forecast 22% rise following the AEI works.

• Some room for improvement at Bedok Point. Our site visit to Frasers Centrepoint Trust’s newest mall at Bedok Point revealed that there is some room for improvement, with unoccupied space in the basement and the lack of strong anchor tenants. We believe that FCT will tweak the tenant mix over the next two years to complement the retail offering of the upcoming 240,000sf mall by CapitaMalls Asia.

• Results in line with expectations. FCT reported a 4QFY11 distributable income of S$18.3m (10.8% yoy, 21.6% qoq) or a DPU of 2.35 cents (8.8% yoy, 20.5% qoq). The total DPU for FY11 was 8.32 cents (1.5% yoy) in line with our expectations representing 99% of our full-year forecasts.

• Revaluation gains of S$97m were recorded from the previous valuations in Sep 10, driven predominantly by 10-25bps lower cap rates at Causeway Point and Northpoint.

Stock Impact
• Causeway Point to drive growth in 2012. Causeway Point recorded strong rental reversions of between 9-22% in FY11, and is on track to reach 22% NPI growth post-AEI. 4QFY11 revenue and NPI realised have already matched prerenovation levels achieved in 4QFY10, even though occupancy averaged 85% in 4QFY11 vs full occupancy in 4QFY10. As the AEI progresses, we should see average occupancy of 90% in FY12 vs the 81% in FY11.