Brokers’ take: Analysts trim Frasers Centrepoint Trust targets after lowering DPU forecast
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Vivienne Tay
ANALYSTS have cut their targets on Frasers Centrepoint Trust (FCT) after adjusting their estimations following the release of the real estate investment trust’s (Reit) results on Wednesday (Oct 25).
On Thursday (Oct 26), RHB shaved its target price on the counter to S$2.12 from S$2.15, while OCBC Investment Research lowered its fair value estimate on the counter to S$2.35 from S$2.41.
The Reit’s results for the full year ended Sep 30, 2023, came in slightly below expectations for RHB, which maintained its “neutral” recommendation on the counter.
It said that retail market conditions have shown “healthy improvement” from steady income growth and tourist arrivals, which has reflected positively on the operational performance of FCT’s malls.
Although FCT remains a defensive safe haven, its current yield spreads are not attractive, said RHB analyst Vijay Natarajan. He has lowered its FY2024-26 distribution per unit (DPU) forecasts by 1 per cent to 3 per cent.
Similarly, DBS Group Research has trimmed its DPU estimates to S$0.119 in FY2024 and S$0.122 in FY2025 to account for a forward yield of 5.6 per cent and 5.8 per cent, respectively.
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The research team also revised its interest rate assumptions for FY2024-25 to a more conservative stance of 4.25 per cent from 4 per cent previously.
In a separate report, OCBC lowered its FY2024 DPU forecasts by 0.4 per cent and FY2025 DPU projections by 1.2 per cent after factoring in FCT’s proposed divestments and its full-year results.
At the end of August 2023, FCT’s manager proposed to divest Changi City Point for S$338 million to an unrelated third party. Over a month later, the Reit manager said it would divest 143.9 million units in Malaysia’s Hektar Reit for RM128.1 million (S$37.4 million).
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“The recent divestment moves are positive, but higher interest and operational cost pressures will continue to weigh on earnings,” said RHB’s Natarajan.
OCBC trimmed its fair value estimates after increasing its cost of equity assumptions to 6.4 per cent from 6.2 per cent on rising market volatility. The research team has a “buy” rating on the counter.
DBS also has a “buy” call on FCT. Its target price remains unchanged at S$2.60, implying a potential upside of 26.8 per cent from the counter’s last trading price of S$2.05 as at 2 pm on Thursday.
FCT’s units were down 2.8 per cent or S$0.06 at the time.
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