Frasers Centrepoint Trust Earnings: Strong Tenant Sales Growth To Translate to Rental Growth

Frasers Centrepoint Trust’s third-quarter fiscal 2023 (ending September) business update was largely in line with our expectations. Shopper traffic and tenants’ sales continue to post impressive year-on-year growth of 16% and 5%, respectively, while year-to-date tenants’ sales averaged 16% above pre-COVID level (2019). The trust also completed its refinancing exercise for fiscal 2023 and lengthened its average debt maturity to 2.5 years as of the end of June 2023, from 1.9 years at the end of March 2023. Meanwhile, the proportion of fixed-rate debt fell to 63% from 76.4% in the previous quarter. We view this positively because we think interest rates are close to peaking and should start falling in 2024. With no major surprises, we retain our fair value estimate of SGD 2.38 per unit. We think the trust is slightly undervalued, and we continue to like its portfolio of high-quality suburban malls, which we believe can help the trust weather any economic downturn due to their roles in providing necessity shopping.