Suburban mall resilience continues to shine as: 1) FCT achieved 14% rental reversion over preceding rents on renewals; mainly from CWP; 2) revenues increased 2% YoY to S$21.2 mn and NPI margins improved on cost control; 3) occupancy remains steady at 93% despite ongoing AEI at Northpoint, 4) occupancy costs remain healthy at 14-16%, well within market benchmarks.
Recently-issued MTN should bring gearing to below 30% and push out refinancing needs till July 2011. Acquisition growth from sponsor’s strong pipeline could be a medium-term catalyst.
We have fine tuned our FY09-11 DPU forecasts by -1-0% to adjust for slower Northpoint AEI completion but better margins. We raise DDM-based target price to S$1.18 (from S$0.77) on lower cost of equity. Trading at 0.8x book of S$1.23, and 7.5% DPU yields.
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