Frasers Centrepoint Trust’s Latest Earnings: Another Year of Growth

Frasers Centrepoint Trust  (SGX: J69U) released its fiscal fourth-quarter earnings report this morning. The reporting period was from 1 July 2015 to 30 September 2015.

The real estate investment trust (REIT) has ownership stakes in six sub-urban shopping malls in Singapore with Causeway Point and Northpoint making up a significant portion of its revenue and income. The REIT also holds a 31.2% stake in Hektar Real Estate Investment Trust (H-REIT).

You can read more about Frasers Centrepoint Trust in here or catch up with the previous quarter’s earnings here.

Financial highlights

The following’s a quick take on Frasers Centrepoint Trust’s latest financial figures:

  1. Gross revenue rose to $47.5 million in the reporting quarter, up 1.7% from the same quarter a year ago. For the full fiscal year ended 30 September 2015 (FY2015), gross revenue was up 12.1% year-on-year.
  2. Quarterly net property income (NPI) inched up by 1.2% to $31.7 million from a year ago. FY2015’s NPI was up 11%.
  3. Share of associate results (operations), which covers Frasers Centrepoint Trust’s ownership stake in H-REIT, fell 14.2% in the reporting quarter from $1.3 million last year to $1.1 million. For FY2015, share of associate’s results (operations) was down 9.5%.
  4. Distribution per unit (DPU) for the fourth-quarter of 2015 was 2.859 cents per unit, which was up 2.8% from the same quarter last year. FY2015’s DPU added up to 11.608 cents per unit, a nice 3.8% step up from the number seen in FY2014. This also marks Frasers Centrepoint Trust’s ninth consecutive year of DPU growth.
  5. The REIT’s property portfolio was valued at $2.5 billion as of 30 September 2015. Frasers Centrepoint Trust ended the reporting quarter with a net asset value (NAV) per unit of $1.91. This is 3.2% higher than the NAV of $1.85 per unit at the end of FY2014.

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

2015-10 FCT Table

Source: Fraser Centrepoint Trust’s earnings presentation

The REIT has seen its balance sheet improve on multiple fronts over the past 12 months. The gearing ratio, all-in financing cost, and total borrowings had all decreased. Meanwhile, the interest cover for the quarter had stepped up while the percentage of borrowings on fixed or hedged rates was kept constant at a healthy level of 75%.  These are all positive signs.

But, there are shortcomings too. As of 30 September 2014, the REIT’s weighted average debt maturity is just 1.6 years – that’s short. The REIT will have more than 65% of its total debt coming due in a narrow span of time from FY2016 to FY2017; the progress of refinancing these loans will be important to track.

Operational highlights

For the whole of FY2015, Changi City Point, which was acquired only in June 2014, had accounted for the majority of the REIT’s revenue and NPI growth. Together with Causeway Point and Northpoint, the trio of malls take up the lion’s share (some 85%) of the REIT’s NPI for the year.

The REIT’s overall portfolio occupancy stood at only 96% at end-FY2015; this is a drop from the occupancy rate of 98.9% seen a year ago. Of the REIT’s six properties, Bedok Point continues to be the laggard of the group with a mall occupancy of just 84.2%; tenant-remixing activity is still ongoing there and the REIT expects occupancy at the mall to remain around that level in the near-term.

Frasers Centrepoint Trust reported a weighted average lease expiry (by gross rent) of 1.54 years. This is an improvement over the number of just 1.40 that was seen at end-FY2014.

On another bright note, overall shopper traffic at Frasers Centrepoint Trust’s malls in the fiscal fourth-quarter increased by 8.2% year-on-year. Investors might be happy to note that both Causeway Point and Northpoint had “registered double-digit shopper traffic increase” during the quarter. Meanwhile, the REIT’s malls had also recorded a 2.1% year-on-year gain in tenants’ sales during the quarter ended August 2015.

Both shopper traffic and tenants’ sales are important metrics to track for retail mall REITs as it can give investors an indication of how healthy the REIT’s assets are.

Looking forward, Dr Chew Tuan Chiong, the chief executive of the REIT’s Manager, remains upbeat about the REIT’s prospects despite uncertainties in the economic environment. In the earnings release, he said (emphasis mine):

“FCT [Fraser Centrepoint Trust] has delivered another set of good results and stable growth for FY2015, continuing the growth trend in the past nine years. Our portfolio of suburban malls continues to perform well, achieving stable occupancy and positive rental reversions despite the current headwinds in the retail sector

…Asset enhancement at Northpoint is scheduled to commence in March 2016. The 18-month programme is expected to deliver a positive return upon completion.

Notwithstanding the uncertain economic outlook, FCT’s well-located suburban malls which attract steady shopper traffic will contribute to the stability and sustainability of the portfolio’s rental income and occupancy rates.”

Foolish summary

Frasers Centrepoint Trust closed at $1.99 yesterday. This translates to a historical price-to-book ratio of 1.05 and a distribution yield of around 5.8%.

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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.