S$1.54-FCT.SI
• The proposed acquisition of Bedok Point (Net Lettable Area of 80,985 sf) from Fraser & Neave for $127 mln is yield accretive based on $7 mln income in the “first lease cycle”.
• Before taking into account debt financing options (combination of debt and issuance of new units), the yield of already 5.5% compares favorably with FCT’s yield of 5.3% based on expected DPU of 8.2 cents for year ending Sept’11.
• Note the June’11 quarter was affected by lower Net Property Income because of the extensive $72 mln refurbishment at Causeway Point, which is FCT’s biggest asset, with NLA of 418,543 sf.
• Refurbishment has caused the occupancy to drop to 69% during the March’11 quarter before rebounding to 78% in the June quarter. By end Sept’11, management expects the level to rise to >90%, hence its confidence in paying no less than 8.2 cents for ye Sept’11 as for the previous year.
• Bedok Point brings to 5 suburban malls in FCT’s portfolio. The next acquisition is expected to be Changi City Point (207,479 sf) and likely to take place in fiscal year ending Sept’12.
• Another attraction of FCT is that a whopping 43.2% of its portfolio is due for rental reversion, and hence likely DPU increase in FY2012.
• We maintain BUY.
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