What Investors Need To Know About Frasers Centrepoint Trust’s Latest Earnings

Frasers Centrepoint Trust (SGX: J69U), or FCT in short, owns a portfolio of six quality suburban shopping malls in Singapore with a combined appraised value of S$2.4 billion. The malls are easy to ascertain as they all end with a “point” at the back of their names; such as Causeway Point, Northpoint and Anchorpoint.

The sponsor of FCT is Frasers Centrepoint (SGX: TQ5). Frasers Commercial Trust (SGX: ND8U) and Frasers Hospitality Trust (SGX: ACV), which invest in commercial assets and hospitality assets respectively, are also sponsored by Frasers Centrepoint.

For the 4th Quarter ended 30 September 2014, FCT’s gross revenue shot up 16% year-on-year to S$46.7 million while net property income improved by 15% to S$31.3 million. The growth was primarily due to 2 reasons: 1) Higher revenue from Causeway Point, after the completion of addition and alteration works in the mall; 2) full quarter revenue contributions by Changi City Point, a mall which caters to the working population in the Changi business park.

On the other hand, FCT’s distribution per unit (DPU) fell 6.5% to 2.785 Singapore cents for the quarter, owing to a 0.35 Singapore cents synthetic boost from its retained earnings last year. Excluding the payout from its own pockets, 4Q14 DPU would be 5.9% higher as compared to 4Q13. Nonetheless, DPU for the full year also reached an all time high of 11.187 Singapore cents, up 2.4% from the preceding year.

Financial & Operational Performance

As of 30 September 2014, the REIT’s gearing level stands at 29.3%, well within the stipulated 30% ratio guideline. The all-in average cost of borrowings came in at 2.51% while its weighted average debt maturity is 2.5 years. It is also labeled with a “Stable” corporate credit rating under both S&P and Moody’s.

On the whole, FCT’s portfolio occupancy increased to 98.9% from 98.4% on a year-to-year basis. Despite the high occupancy rate, the shopper traffic trend shows a cause for concern. FCT’s portfolio, excluding CCP, has experienced a steady decline in shopper traffic through the last 2 years. Using the figures as of Oct 2012, the people who visited their malls have fallen 6.7% from 22 million to 20.52 million. The worrisome trend may well continue in the long run as more people head for online shopping at their own convenience.

Outlook and Valuation

Nevertheless, Dr Chew Tuan Chiong, Chief Executive Officer of the Manager of FCT, was particularly buoyant about the positive results. He commented:

“We are pleased that FCT has delivered another strong set of results for the year with new highs in DPU, income and NAV. We have also successfully acquired Changi City Point, FCT’s largest post-IPO addition. The addition of Changi City Point is DPU accretive and it strengthens FCT’s ability to continue to deliver steady performance. Going forward, we will continue to pursue our strategy of growth through organic and acquisitive means.”

FCT’s units closed at S$1.94 on yesterday. It is trading at 1.07 times its current net asset value and a 5.72% distribution yield.

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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 James Yeo doesn’t own shares in any companies mentioned.