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First Quarter Distributions Up for Frasers Commercial Trust

The aptly named commercial properties real estate investment trust Frasers Commercial Trust (SGX: ND8U) announced its first quarter results this week. The REIT’s currently a division of property developer Frasers Centrepoint Limited (SGX: TQ5), which was recently carved out from the Fraser & Neave Group (SGX: F99).

FCT currently owns a total of  5 commercial properties in Singapore and Australia that are collectively valued at S$1.78b. The value of the properties are split in a 66:34 ratio among the two respective countries.

Performance

For the three months ended 31 Dec 2013,  the trust’s revenue and net property income both declined due to the lower Australian dollar and a lower occupancy in one of its Australian properties, the Central Park.  Revenue dropped 3% year-on-year to S$28.8m while net property income declined 4% to S$22.1m.

Meanwhile, the trust was able to increase its distribution per unit (DPU) by 30% year-on-year to 2.05 Singapore cents, mainly due to lower finance costs for the quarter, and savings in distribution to holders of the trust’s Series A Convertible Perpetual Preferred Unit (CPPU) after redemptions were made for these securities..

The REIT’s average occupancy for its properties is still strong at around 97%. Although the Australian properties only contribute about 34% of FCT’s total asset value,  the REIT’s net property income is split evenly between the two countries.

Outlook

The master lease for one of the REIT’s Singapore properties, the Alexandra Technopark, is due August this year. Together with some other minor leases, FCT needs to renew a total of 50.7% of its total “Net leasable area”. During the lease-renewal process, the REIT expects to be able to increase the net-rent it receives.

Currently, FCT is still able to maintain a relatively strong balance sheet with a gearing of 37.9% that is still well below the 60% legal limit. The Trust is also optimistic that office rents in Singapore have started to grow and it is expecting a more positive rental market here.

In addition, the trust also expects its distributable income to continue to grow, due to the redemption of its CPPUs, possible rental increase in Alexandra Technopark, and better connectivity from China Square Central to major public transport stations.

FCT is currently trading at $1.265 and selling for 0.8 times book value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.