• 1Q07 DPU of 1.54 cents, up 6.2% from distribution of 1.45 cents in the previous quarter

• Growth pipeline increased with the addition of two malls: the potential Bedok retail mall and YewTee Point under the Sponsor s portfolio

1Q07 DPU slightly above expectations. FCT’s 1Q07 DPU of 1.54 cents is slightly above our estimates. Gross rental revenue of S$19.2m grew 8.1% y-o-y, mainly attributed to positive reversions from renewals and new leases, as well as higher carpark income and additional income from leasing of Atrium space, etc. Net property income grew 4.2%, mitigated by higher expenses. Occupancy for FCT’s portfolio continues to be healthy at 98.8%, slightly affected by Anchorpoint currently repositioning into a village-mall concept. Distributable income was S$9.47m, 4.3% above FCT’s own forecast.

Further expansion of pipeline. To recap, moving forward we expect FCT to focus on asset enhancement plans in the near term, followed by planned acquisitions. Asset enhancement is targeted to commence from Jan 2007 and span 20 months for each of the three properties in the initial portfolio. Acquisition pipeline in the near term remains status quo with Centrepoint property and Yishun extension to complete in FY08 and FY2010 respectively. In the longer term, Frasers Centrepoint (“FCL”) has recently acquired two properties in Bedok Town Centre for S$40.8m as well as an option agreement to acquire Yew Tee Point from NTUC Choice Homes, expected to complete in 2009. Therefore, small is beautiful for FCT which is slowly but steadily expanding its acquisition pipeline which we estimate to double to S$1.8bn by 2010.

Maintain hold with raised TP at S$1.53. We have rolled forward our DCF estimates to FY2011, maintaining a five-year investment horizon. Besides incorporating acquisition assumptions for Centrepoint and Yishun property to be completed by 2008 and 2010 respectively, we have also included potential acquisition of the Bedok property and Yew Tee Point in our estimates. Therefore we are raising our target price to S$1.53 based on DCF valuation but maintain our Hold recommendation for FCT.

Frasers Centrepoint Trust maiden distributable income higher than forecast

Frasers Centrepoint Trust has reported a strong set of maiden results. It booked a distributable income of S$8.9 million for the three months from June 5 to September 30. This works out to a distribution of 1.45 cents a unit. This is 7.2 percent higher than the forecast of 1.36 cents given during its initial public offering.

The retail REIT attributed the robust performance to strong renewal rates and tight control over costs. Full occupancy rates at two of its three malls, Northpoint and Causeway Point, also contributed to the better-than-expected results. Its property income was 3.5 percent better than forecast at S$12 million.

Going forward, Frasers says it expects to benefit from the buoyant retail industry. "We will have a substantial renovation and refurbishing of Anchorpoint which is going to be repositioned as an F&B hub, a very strong village mall concept. We are very excited about that. You will see work starting in the first quarter of 2007. It will take about 7 months for us to complete it in phases," says Christopher Tang, CEO of Frasers Centrepoint Trust. "That is the first of our series. You will see the same thing going forward in Causeway Point as well as Northpoint," he adds. - CNA /ls

FRASERS Centrepoint Trust (FCT) has set an indicative price of around 20 basis points above Singapore's three-month swap offered rate for its planned sale of S$260 million mortgage-backed securities, the lead manager of the sale said. The book-building for the commercial mortgage-backed bonds - which will mature in 4.8 years - is expected to be completed by Sept 12, Warren Lee, head of asset-backed securities at Standard Chartered in Hong Kong, told Reuters. The three-month swap offered rate on Friday was quoted at 3.64 per cent.

The bonds will be backed by three properties of the trust - Causeway Point, Northpoint and Anchorpoint - all of which are in Singapore, Mr Lee said. Standard Chartered and Oversea-Chinese Banking Corp are co-lead managers for the transaction, which is the first such deal denominated in Singapore dollars this year. Moody's Investors Service last week provisionally rated the bonds as Aaa - its highest quality rating. The sale comes after FCT raised S$270 million in an initial public offering of its units in July.

Singapore property companies have been selling equity and raising debt to build assets in order to take advantage of the recovery in property prices. Home prices rose 1.8 per cent in April-June, their biggest quarterly increase in more than six years. - Reuters

Cambridge may relodge its preliminary prospectus

FRASER & Neave's real estate investment trust, Frasers Centrepoint Trust (FCT), rose as much as 4.85 per cent yesterday on its trading debut.

The rise came amid talk that the strong response from investors to its initial public offering would encourage IPO aspirant Cambridge Industrial Trust to relodge its preliminary prospectus as early as today. Cambridge, led by venture capitalist Finian Tan, who is also chairman of the trust's manager, had deferred its IPO last month due to poor market conditions. Mr Tan had told the media that the Reit would be aligning the returns offered to shareholders 'better with market expectations'. A banker told BT that Cambridge was encouraged by the market reception to FCT's IPO. The IPO was also seen by market sources as 'imminent'.

FCT's offering of nearly 262 million units at $1.03 apiece was 2.1 times subscribed. Its public tranche (excluding reserved units) was 5.9 times subscribed. This tranche comprised 11.5 million units for the public and 8.5 million reserved units. FCT rose to an intra-day high of $1.08 yesterday, but cooled towards the afternoon, ending two cents higher at $1.05. A total of 5.08 million units changed hands.

Meanwhile, CapitaMall Trust (CMT) - which is Singapore's most popular shopping centre-based Reit - slipped four cents to $2.15. But dealers said there has been no switching from CMT to FCT. 'A few cents up or down does not reflect that the market is switching out of CMT. The movements are still within overnight trading prices. If FCT rose by more than 10 cents or CMT fell under $2, then you can make such an inference,' one dealer said. But the dealer said investors might switch to FCT if the reit achieves its aim of doubling assets under management, now worth $915.2 million, within three years. In a report entitled 'Another CMT in the making?', Credit Suisse analysts Melissa Bon and Ernest Fong record their optimism that this will happen. 'A salient point about FCT is its first right of refusal to purchase its sponsor's local retail assets and any future retail developments by its sponsor for five years from its listing date,' they write. The reit has identified two potential acquisition targets - Centrepoint Shopping Centre and Northpoint Extension - which could increase FCT's net lettable area by 60 per cent and account for 90 per cent of the targeted increase in assets under management, the analysts noted.

At their projected earnings and yesterday's closing prices, FCT offers a FY2007 yield of 5.57 per cent, while CMT offers a FY2007 yield of 5.75 per cent. But the forecasts 'have not imputed any accretion from FCT's asset enhancement plans', they said.

Yang Sy Jian, research head at UOB Kay Hian, said CMT's portfolio has more quality and is better diversified into geographically strategic regions. As to whether FCT can repeat CMT's success, he said: 'It is too early to make a judgment.'

International tranche said to be two times covered

FRASERS Centrepoint Trust (FCT) launched its initial public offering (IPO) yesterday, braving talk of a waning in the popularity of real estate investment trusts (Reits) here. CEO and executive director of FCT manager Frasers Centrepoint Asset Management (FCAM), Christopher Tang, said that the reason it went ahead with the IPO was that FCT had already received 'very good response from investors'.

The IPO consists of an international placement (including institutional investors) of 241.93 million units, out of a total of 261.93 million units. DBS and OCBC are the joint financial advisers, while DBS, OCBC and UBS Investment Bank are joint lead underwriters and bookrunners. And a source close to the deal said that the international tranche is two times covered.

FCT, which has assets with a combined value of $915.2 million, was offered at $1.03 a unit. It hopes to raise $269.79 million. Based on the IPO price, the projected distribution yield for financial year 2007, starting from Oct 1, 2006, is 5.68 per cent.

Giving his take on how Singapore Reits (S-Reits) will evolve over time, Mr Tang said he expects to see a 'two-tier' market, with developer-based Reits dominating the top tier and non-developer-based Reits representing the lower tier. Emphasising that FCT is clearly a top-tier Reit, he said Reit sponsor Fraser Centrepoint Ltd (FCL) is not undertaking this Reit exercise as an 'asset sell-down'. As such, Mr Tang confirmed that FCT will be enhancing its three assets - Causeway Point, Northpoint and Anchorpoint - although detailed plans are not ready to be announced. He did, however, give an example of an earlier asset enhancement exercise at Northpoint where the cineplex on the seventh floor was reconfigured to achieve 62 per cent more net lettable area (NLA). He added: 'The IPO price has not included our clear asset enhancement plans and future acquisitions. We have been very conservative.'

FCT sponsor Fraser Centrepoint does have a pipeline of overseas properties, but Mr Tang said the Reit will focus on Singapore for the first three years. Future acquisitions will include the new extension to Northpoint and the more coveted Centrepoint mall on Orchard Road. These acquisitions could raise the initial NLA by 62.5 per cent.

Reit sponsor FCL will receive 57.4 per cent of the total number of units in issue immediately after completion of the IPO. At IPO, FCT will have an initial level of indebtedness of $281.3 million. It expects to have a gearing of 28.6 per cent.