BUY S$1.46
Price Target : S$ 1.76 (Prev S$ 1.73)
At a Glance
• FY11 DPU of 8.32 Sct was slightly above our expectation of 8.2 Sct
• Revenue to trend up supported by multipronged growth engines; gearing healthy at 31%
• Good defensive stock; maintain BUY, TP raised slightly to S$1.76
Comment on Results
FY11 DPU of 8.32cts at a record high. On a y-o-y basis, 4Q11 revenue and NPI rose 5.1% and 13.7% to S$34.1m and S$25.3m respectively on the back of strong portfolio performance and partial completion of the AEI works at Causeway Point. Portfolio occupancy strengthened from 87.6% a quarter ago to 95.1% and the group renewed 34,161sf of retail space at 7.9% higher than the preceding rents. Consequently, distribution income rose 10.8% to S$18.3m, translating to a DPU of 2.35 Scts. There was net revaluation gain of S$97.2m, largely from Causeway Point and North Point at slightly compressed cap rates (lowered by 10 to 25bps), as well as Bedok Point bringing portfolio value to S$1.7bn or book NAV of S$1.40/unit (+8.5% y-o-y).
Revenue drivers all set for next year. Going forward, we expect to see steady income growth from (1) full year contribution from Bedok Point from 1QFY12 - expected to add about S$7m p.a. at NPI level; (2) progressive completion of AEI works at Causeway Point and reopening of the refurbished sections at the basement, level 1 and 2; (3) ability to continue to drive rental reversions with 35% of its portfolio NLA up for renewal in FY12. 98% of the leases have step-up rental clauses and we expect 3-5% rental reversion in FY12; and (4) interest savings from refinancing of the S$80m revolving loan.
Recommendation
Yield for FY12 at 6.1%, Maintain BUY. We continue to like FCT for its pure exposure to the resilient and stable suburban market. Balance sheet remains robust with 31.3% gearing. We nudge up FY12F DPU by 1.6% after including the additional income from Bedok Mall. Maintain BUY with a slightly higher DCF-based TP of S$1.76 as we roll our numbers forward into FY12.
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