Frasers Centrepoint Trust’s Latest Earnings: New Records Set

Yesterday evening, Frasers Centrepoint Trust (SGX: J69U) released its fiscal second-quarter results for the three months ended 31 March 2015.

Frasers Centrepoint Trust is a real estate investment which owns a total of six suburban retail malls in our country. These malls, which include Causeway PointNorthpoint, and YewTee Point, are collectively valued at S$2.4 billion as at 30 September 2014.

The REIT is sponsored and managed by real estate outfit Frasers Centrepoint Ltd (SGX: TQ5), which also sponsors other trusts like Frasers Commercial Trust (SGX: ND8U) and Frasers Hospitality Trust (SGX: ACV).

Financial highlights

For the fiscal seoncd-quarter, Frasers Centrepoint Trust’s gross revenue increased 15.9% year-on-year to S$47.5 million. This was on the back of contributions from Changi City Point (acquired in June 2014), and higher rent received from other malls. As a result of the revenue growth, the REIT’s net property income (NPI) jumped by 14.4% to a record high of S$33.5 million.

The new kid on the block, Changi City Point, had contributed to 11.8% of the REIT’s NPI. Collectively, Causeway Point, Northpoint and Changi City Point had accounted for 85% of the REIT’s total NPI.

A higher NPI had helped Frasers Centrepoint Trust’s distributable income grow by 14.1% to S$27.2 million.

But due to a much higher number of units in issue, the REIT’s distribution per unit (DPU) for the quarter only managed to step up by 2.9% to 2.963 Singapore cents from 2.88 cents in the same period a year ago. Despite the relatively small year-on-year increase in the DPU figure in the quarter, it was still Frasers Centrepoint Trust’s “highest-ever second quarter DPU.”

Here’s a table showing how some important metrics on Frasers Centrepoint Trust’s financial health has changed over the course of the year:

Frasers Centrepoint Trust's balance sheet figures (23 April 2015)

Source: Frasers Centrepoint Trust’s earnings release

From above, the trust has seen its financial health weaken slightly when pitted against the same period a year ago. The gearing ratio has increased; the interest cover has fallen; the debt level has climbed; and the cost of borrowings (interest rates) has also grown.

But that said, it’s worth pointing out that those metrics, as of 31 March 2015, still look healthy. In addition, investors might also be happy to see that 87% of Frasers Centrepoint Trusts’s borrowings have fixed rates as that means that the REIT may not be hampered as much if and when interest rates rise.

Some S$334 million worth of borrowings will have to be repaid in FY2015 (financial year ending 30 September 2015) and FY2016. As that makes up a significant chunk (some 47%) of Frasers Centrepoint Trust’s total debt at the moment, investors might want to keep an eye on the REIT’s progress in refinancing those borrowings.

Frasers Centrepoint Trust ended the fiscal second-quarter with a net asset value per unit of S$1.86, up 4.5% from the figure of S$1.78 seen a year ago.

Shining an operational spot-light

Let’s take a look at some of Frasers Centrepoint Trust’s operational performance now.

  • The REIT ended 31 March 2015 with an overall portfolio occupancy rate of 97.1%; the portfolio occupancy figure stood at 96.8% exactly a year ago.
  • Shopper traffic for the fiscal second-quarter, excluding Changi City Point, came in at 20.8 million, up 2% compared to a year ago.
  • Frasers Centrepoint Trust managed to achieve a positive rental reversion of 3.8% during the quarter; the selfsame figure a year ago was 9.3%.
  • In the next six months of the current financial year (FY2015), 16.1% of leases are to be renewed, with the bulk of the renewals occurring at YewTee Point, Northpoint, and Causeway Point. Investors might want to watch the rental rates that the renewed leases will fetch.

What’s next for the trust?

Dr Chew Tuan Chiong, Chief Executive Officer of Frasers Centrepoint Trust’s manager, gave some quick comments in the latest earnings release on the REIT’s future outlook:

“While concerns persist over manpower shortage and slowing retail sales growth, the rising average household income and low unemployment rate will continue to underpin consumer spending, which will benefit FCT’s [Frasers Centrepoint Trust’s] well-located suburban malls. Barring any unforeseen circumstances, we expect FCT’s performance to remain sustainable.”

The REIT closed at S$2.10 on Wednesday and is trading at 1.1 times its latest net asset value per unit at that price. Its units also carry a distribution yield of 5.5% based on its trailing distributions.

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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.