Following a downgrade just over two months ago, Maybank Securities' Krishna Guha has upgraded Frasers Centrepoint Trust J69U back to "buy" from "hold", with an unchanged target price of $2.35.
From Guha's perspective, FCT is seen to deliver a combination of attractive valuation, resilient retail sales, underpinned by a quality portfolio and a potential beneficiary of rotation of fund flows.
Since the downgrade in April 27, FCT's unit price has dropped by 5%, to trade at 0.93x P/B and delivering a yield of 5.55%, and is 1 sd below its historical mean.
FCT is the largest suburban retail landlord, with its portfolio of ten malls worth $6.9 billion.
"We think this is attractive given the high quality portfolio of retail malls located next to transport nodes and dense population catchments," writes analyst Krishna Guha in his July 4 note.
"Given the focus on necessary shopping and the current low unemployment rate, we expect operating metrics to be stable resulting in a stable distribution profile," he reasons.
As of 1HFY2023, FCT's monthly tenant sales are 14% higher on average than pre-pandemic levels.
In addition, Guha believes that fund flows may rotate to domestic-focused counters such as FCT, after visitor arrivals dipped in May, and hospitality REITs have outperformed in Q2.
Guha's unchanged target price of $2.35 is is based on a dividend discount model factoring in 6.6% cost of equity.
As at 10.40am, FCT was up 2 cents to change hands at $2.19.
