Frasers Centrepoint Trust: Retail Portfolio Remains Strong; Upcoming RTS to Test Management's Skills

We keep our fair value estimate of SGD 2.42 per unit for narrow-moat Frasers Centrepoint Trust, or FCT, after an in-line third-quarter fiscal 2024 (ending September) business update. The trust’s fiscal third-quarter shopper traffic and tenant sales year-on-year growth slowed to 4.1% and 0.7%, respectively. This is within our expectations, given the strong 16% year-on-year growth in outbound departures of Singapore residents from April 2024 to May 2024, according to the Singapore Immigration & Checkpoints Authority. Nevertheless, FCT’s retail asset portfolio continues to perform well, with every mall achieving more than 99% committed occupancy. Management highlighted that its asset enhancement initiative at Tampines 1 has achieved 100% committed occupancy and is projected to outperform its targeted return on investment of 8%. Besides rejuvenating common areas like the toilets, entrance, and customer service counter, the AEI also introduced 68 new retail concepts to expand the mall’s offerings. Looking ahead, management guided for another upcoming AEI project to drive medium-term growth.