Distributions Increase for Fraser Centrepoint Trust Despite Falling Shopper Traffic

Fraser Centrepoint Trust (SGX:  J69U), or FCT for short, is an owner of five operational suburban retail properties in Singapore and they are worth a collective S$2 billion as of 30 Sep 2013.

Yesterday, the REIT announced that its gross revenue for the second quarter had risen 2.9% year-on-year to S$41 million while net property income went up 2% to S$29.3 million. Distribution to unitholders increased to S$23.8 million, up from $22.3 million in the previous year. Consequently, distribution per unit (DPU) increased 6.7% to 2.88 Singapore cents.  The gross revenue and net property income achieved in the latest quarter are record quarterly highs for the trust.

The 2.9% rise in gross revenue during the quarter was largely due to higher revenue contribution from Causeway Point. Revenue from the mall itself rose 7.6% year-on-year to S$20.7 million on the back of “higher gross rent from improved rental rates for new and renewed leases, higher car park income and turnover rent”. Turnover rent is rent that is based on the turnover (or revenue) generated in a premise.

As of 31 March 2014, the gearing ratio at the retail trust was at 27.7%, with the weighted average interest rate at 2.7% and the weighted average debt maturity at 2.75 years. The net asset value per share stood at S$1.78, a rise of one Singapore cent from half a year ago.

The portfolio occupancy rate was at a healthy 96.8%. However, that’s a slight decline from an occupancy rate of 98.2% a year ago. The drop in the occupancy rate was due to ongoing refurbishment works at Bedok Point. The REIT expects the occupancy rate at Bedok Point to recover from 77% currently to above 95% in the second half of this year, following new tenants – including an anchor tenant – starting their new leases.

For some other operational highlights, the REIT had seen positive average rental reversion of 9.3% in the quarter, so that’s a plus for unitholders. On the other hand, shopper traffic at the REIT’s malls have been steadily declining since the quarter ended Dec 2012. For the latest quarter, FCT saw a 7.6% year-on-year drop in shopper traffic to 20.38 million, which the REIT attributes to a poorer showing from Bedok Point (due to the refurbishment) and Causeway Point. In any case, it might be worthwhile for investors to keep an eye on the trend for shopper traffic as that can be an indication on the health of FCT’s assets.

Going forward, FCT will acquire Changi City Point for S$305 million, as announced earlier this month. This will be the sixth mall in its portfolio and the acquisition will increase its total assets by around 14% to S$2.4 billion. The new mall coming on board will help to enhance FCT’s future growth, says Dr Chew Tuan Chiong, Chief Executive Officer of the manager of FCT. He went on to add that the addition of Changi City Point will also strengthen FCT’s ability to continue to deliver good and stable distribution returns to its unitholders.

FCT is currently priced at S$1.82. This translates to a price-to-book ratio of 1 and a distribution yield of 6%, taking into account the latest DPU and that of the last three quarters.

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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 Sudhan P doesn’t own shares in any companies mentioned.