Distributions at Frasers Commercial Trust Grow By 3%

Frasers Commercial Trust (SGX: ND8U), or FCOT, announced on Wednesday that gross revenue for the second quarter of its financial year 2014 (2Q FY2014) dipped 3.7% year-on-year to S$28.6 million.

FCOT owns five commercial real estate properties in both Singapore and Australia and is sponsored and managed by Frasers Centrepoint Limited (SGX: TQ5). Frasers Centrepoint Trust (SGX: J69U), which released its latest quarterly results on Tuesday, is another real estate investment trust that is sponsored and managed by Frasers Centrepoint Limited.

With gross revenue in the doghouse, FCOT’s net property income for the quarter also decreased by 5.8% year-on-year to S$21.7 million. The decreases in gross revenue and net property income were mainly due to the weaker Australian dollar and lower occupancy for Central Park, a premium grade office tower and the tallest building in Perth, Australia. The negatives however, were somewhat mitigated by certain improvements in the REIT’s Singapore operations; gross revenue for FCOT’s Singapore-based properties for the quarter was up 4.2% year-on-year, mainly due to the higher occupancy and rental rates achieved by China Square Central.

Despite the slip-up in net property income, distribution per unit (DPU) was at 2.05 Singapore cents, up 3% year-on-year. The increase came on the back of higher distributable income as the REIT experienced savings from paying out lower distributions to holders of its Convertible Perpetual Preferred Units (CPPU).

As of 31 March 2014, FCOT had a gearing ratio of 37.8% and an average borrowing rate of 2.7% per annum. Even though there was lower occupancy at Central Park (which was one of the causes of the dip in net property income), the trust managed to achieve an overall occupancy rate of 97.5%, as compared to 95.3% a year ago. The net asset value was at S$1.55.

The properties in Singapore continue to achieve positive rental reversions of up to 18.2% for leases which commenced in the latest quarter.

Looking ahead, Mr Low Chee Wah, Chief Executive Officer of the manager of FCOT, said, “We are pleased to report continuing and steady growth in 2QFY14. China Square Central continues to benefit from the Precinct Master Plan, asset enhancement initiatives and the Telok Ayer Mass Rapid Transit station on the Downtown Line which opened in December 2013. The expiry of the master lease at Alexandra Technopark in August 2014 will also provide the Trust with stronger growth going forward. In the meantime, we will continue to pursue our strategy of both organic and in-organic growth.”

The units last changed hands at S$1.295 on Wednesday, translating to a price-to-book ratio of 0.8 and a distribution yield of 6%.

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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.