Is Frasers Centrepoint Trust Worth Looking At Now?

You might not realise this, but Frasers Centrepoint Trust (SGX: J69U) actually helps Singaporeans fulfil two of their favourite things.

Shopping has often been lauded as one of Singaporeans’ most prized past-times. As one of the largest retail mall owners listed in Singapore, Frasers Centrepoint Trust provides the venue for Singaporeans to scratch their shopping itch.

Meanwhile, as a real estate investment trust (REIT), Frasers Centrepoint Trust also presents itself as an additional option for Singaporeans looking to invest in REITs, a very popular investment choice amongst local investors.

With that, let’s take a closer look at Frasers Centrepoint Trust and what the future might hold for it.

The business

Frasers Centrepoint Trust, with a current market capitalisation of around S$1.9 billion, owns six suburban retail malls in Singapore. They are namely, Anchor Point, Bedok Point, Causeway Point, Changi City Point, Northpoint, and Bedok Point.

Since its listing in 2006, the trust has been able to grow its distributions per unit steadily in each consecutive year at an average annual rate of 8%. You can see this in the table below:

Financial year ended 30 September Distributions per unit (Singapore cents)
2006 4.35
2007 6.00
2008 7.29
2009 7.51
2010 8.20
2011 8.32
2012 10.01
2013 10.93
2014 11.19

Source: S&P Capital IQ

For an investor who bought into Frasers Centrepoint Trust at its IPO, he or she would have earned an average annual total return over the past nine years of around 14%. That’s not too shabby at all.

The presence of an economic moat

In my opinion, the key moat that Frasers Centrepoint Trust enjoys has to do with location: All six of its malls are close to (if not next to) a major MRT station or bus interchange. This helps ensure high traffic flow within its malls.

Although there are worries that the presence of e-commerce might jeopardize the future of malls, I think people still enjoy going to the mall for a good meal or just for a leisurely day out with their family. And with its malls located near key transport nodes, Frasers Centrepoint Trust’s properties are much better positioned for the future than others.

Just a quick look at the occupancy rate the REIT enjoys will show us the attractiveness of its malls: Since 2009, Frasers Centrepoint Trust has never experienced an occupancy rate of lower than 93%.

Smart capital allocation

Frasers Centrepoint Trust is being managed by its sponsor, Frasers Centrepoint Ltd  (SGX: TQ5).

Throughout the years, Frasers Centrepoint has displayed savviness when allocating capital for Frasers Centrepoint Trust.

Many of the asset enhancement initiatives (AEIs) that the REIT has undertaken have proven to create good value for its unit-holders. For example, the AEIs on Northpoint, Anchorpoint, and Causeway Point have all achieved a return on investment of more than 10% each.

Moreover, the consistent growth in Frasers Centrepoint Trust’s distribution per unit (DPU) over the past nine years is also an indication of the prudent capital allocation chops that Frasers Centrepoint has.

Foolish Summary

Even though the threat of e-commerce is  real in the retail industry, the track record of Frasers Centrepoint Trust has shown us that retail malls are still able to survive and thrive in this environment.

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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 writer Stanley Lim owns Frasers Centrepoint Ltd.