Frasers Centrepoint Trust’s Earnings: What Investors Need to Know

Frasers Centrepoint Trust  (SGX: J69U) released its fiscal first quarter earnings report last Friday for FY2015 (fiscal year ending 30 September 2015). The reporting period was from 1 October 2014 to 31 December 2014.

The real estate investment trust (REIT) has ownership stakes in six sub-urban shopping malls in Singapore. For Frasers Centrepoint Trust, Causeway Point and Northpoint make up a significant portion of its sales and income.

You can read more about the REIT here, and here

Financial highlights

Here’s a rundown on the financial figures for Frasers Centrepoint Trust’s latest results:

  1. Gross revenue rose to $47.2 million in the latest quarter, up 18.3% from the same quarter a year ago.
  2. Net property income (NPI) rose by 16.2% year-on-year to $32.9 million.  The REIT’s strong growth in gross revenue and NPI had largely been due to (1) the acquisition of Changi City Point in June 2014, and (2) higher contributions from Causeway Point “due to step-up rents and positive rental reversion achieved during the quarter.”
  3. Share of associate results – which covers Frasers Centrepoint Trust’s ownership stake in Malaysia-listed Hektar REIT – fell 2.3% from $1.23 million a year ago to $1.21 million in the reporting quarter.
  4. Distribution per unit (DPU) for the fiscal first quarter was 2.75 cents, a nice 10% bump up from the DPU of 2.5 cents declared for the first quarter a year ago.
  5. The REIT’s property portfolio was valued at $2.4 billion as of 30 September 2014.
  6. Frasers Centrepoint Trust reported an adjusted net asset value per unit of $1.85 for the fiscal first quarter, a 4.5% increase from the figure of $1.77 seen a year ago

Foolish investors might want to keep an eye on a REIT’s debt profile. The debt profile may provide clues on how the REIT is funded, and its sensitivity to the interest rate environment. These are summarized below for Frasers Centrepoint Trust:

Gearing Ratio 29.3%
Interest cover for the quarter 6.27 times
Weighted average debt to maturity 2.25 years
All-in financing cost 2.66%
% borrowing on fixed rates or hedged 87%

Source: Frasers Centrepoint Trust’s presentation material

It is notable that Frasers Centrepoint Trust’s weighted average debt to maturity is a relatively short 2.25 years – it will make the next couple of years important to observe when the REIT has to refinance its borrowings. It’s also worth pointing out that the REIT’s cost of borrowing has inched up from 2.5% a year ago to about 2.66% in the reporting quarter.

The next three years (FY2015, FY2016, and FY2017) will be a big test for the REIT’s flexibility of funding as around 74.3% of its borrowings will come due. Foolish investors should keep a watchful eye.

Operational highlights

The addition of $6.5 million in revenue from Changi City Point accounted for the majority of the rise in the REIT’s overall revenue for the quarter, as mentioned earlier. On the NPI side, Changi Point has quickly grown to make up 12% of Frasers Centrepoint Trust’s total NPI.

Overall portfolio occupancy stood at 96.4% for the quarter. Bedok Point was the laggard of the group with an occupancy rate of 90.8%. A visit to Bedok Point revealed strong competition from Bedok Mall and diminished shopper traffic.

On a more positive note, the REIT’s overall shopper traffic to its malls increased by 5% from the previous quarter. Looking forward, Mr Chew Tuan Chiong, Chief Executive Officer of the REIT’s Manager, had this statement to add:

“FCT continues to achieve consistent performance with an average rental reversion of 7.7% for the leases that were renewed in 1Q15, which accounts for about 49% of the total expiring NLA in FY2015. This is a good start for the year and we will continue to focus our efforts on the remaining leases due to be renewed later in the year.

We saw a 4.8% year-on-year increase in tenants’ sales for the 3-month period ended November 2014, with Causeway Point and Northpoint outperforming the rest of malls in the portfolio. This is an encouraging result from our marketing initiatives and efforts to attract higher sales for the malls.

With Singapore’s economy in 2015 expected to grow at a pace similar to that of 2014, barring any unforeseen circumstances, we expect FCT’s performance to remain sustainable.”

Foolish summary

Frasers Centrepoint Trust last traded at S$2.02 last Friday. This translates to a historical price-to-book ratio of 1.1 and a distribution yield of around 5.7% (based on the REIT’s DPU over the last 12 months).

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.