Highlights from Frasers Commercial Trust’s Third Quarter Results

frasers commercial trust

Frasers Commercial Trust (SGX: ND8U), an owner of five commercial properties in both Singapore and Australia, made public its third quarter results yesterday.

The real estate investment trust has direct interests in China Square Central, 55 Market Street, and Alexandra Technopark in Singapore. In Australia, it has indirect interests in Central Park (located in Perth) and Caroline Chisholm Centre (located in Canberra).

For the three months ended 30 June 2014, the REIT’s gross revenue slipped by 1.1% year-on-year to S$29.6 million mainly due to the weaker Australian dollar. For the Singapore properties alone gross revenue rose by 3% year-on-year due to the higher occupancy and rental rates achieved by China Square Central.

Net property income for the REIT also decreased in line with a dip in gross revenue; the former was at S$22.9 million, a decrease of 0.7% from a year ago. The slight drop in net property income had been due largely to the weaker Australian dollar and slightly higher expenses incurred at Caroline Chisholm Centre due to the up-keeping needed at the building.

All told, the REIT ended the quarter with a distribution per unit (DPU) of 2.19 Singapore cents, unchanged from the previous year. Even though the REIT’s net property income was slightly lower for the quarter, savings from the Convertible Perpetual Preferred Units had led to higher distributable income for Frasers Commercial Trust’s unit-holders.

As of 30 June 2014, the trust had a gearing ratio of 37.7%, a slight increase from the ratio of 37.8% seen in the previous quarter sequentially. 51% of the REIT’s borrowings were hedged, with the average interest rate standing at 2.8%. Frasers Commercial Trust also ended the quarter with a net asset value per unit of S$1.56, a slight uptick from the figure of S$1.55 seen in the previous sequential quarter.

The REIT’s overall portfolio had an occupancy rate of 98.0% while the occupancy rates in Singapore and Australia were at 98.4% and 97.3%, respectively. This compares against Keppel REIT’s (SGX: K71U) portfolio-level occupancy rate of 99.4% in its latest earnings release; Keppel REIT owns 10 commercial properties in both Singapore and Australia, so it could be a good comparison for Frasers Commercial Trust.

At China Square Central, completed asset enhancement initiatives and greater connectivity to the Telok Ayer Mass Rapid Transit station, which was opened at the end of last year, have increased the attractiveness of the building. The office tower has a full occupancy rate.

The manager of the trust said that the master lease at Alexandra Technopark will be expiring in August this year and any positive rental reversion – if it happens – would be able to boost the performance of Frasers Commercial Trust going forward.

Units of the REIT are worth S$1.42 apiece as of Monday. That translates to a price-to-book ratio of 0.91 and a distribution yield of approximately 6%.

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