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

Frasers Commercial Trust  (SGX: ND8U) released its fiscal first-quarter earnings report yesterday evening. The reporting period was from 1 October 2015 to 31 December 2015.

The real estate investment trust (REIT) has ownership stakes in six commercial properties located in Singapore and Australia. Its portfolio in Singapore includes China Square Central and Alexandra Technopark.

Financial highlights

The following’s a quick take on the latest financial figures for Frasers Commercial Trust:

  1. Gross revenue rose to $39.6 million in the latest quarter, up 11.7% from the same quarter a year ago.
  2. Quarterly net property income (NPI) rose as well, by 15.5% year-on-year to $29.4 million.
  3. Distribution per unit (DPU) for the first-quarter of the financial year ending 31 September 2016 (FY2016) was 2.51 cents. This was up 2% from the corresponding quarter last year.
  4. Frasers Commercial Trust’s property portfolio was valued at $1.96 billion, as of 31 December 2015. It reported a net asset value per unit of $1.53 for the reporting quarter, down slightly from $1.56 a year ago.

Beyond these, Foolish investors might want to keep an eye on a 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 summarised for Frasers Commercial Trust below:

2016-01-20 FCOT Debt Table
Source: Frasers Commercial Trust’s earnings presentation

The REIT’s average borrowing rate had risen year on year to 3.07% and that may be worth watching as higher interest expenses has the potential to eat into the bottom-line.

This came as Fraser Commercial Trust increased its total borrowings to $739 million while increasing its hedged borrowings to 81%. As of 30 December 2015, the REIT’s weighted average debt to maturity was 3.3 years. There is no debt coming due in FY2016.

Operational highlights

The REIT ended 31 December 2015 with an overall portfolio occupancy of 92.9%, which is a significant drop from the selfsame figure of 96.6% seen a year ago. Investors may want to keep an eye on occupancy trends.

Meanwhile, Frasers Commercial Trust had a portfolio weighted average lease expiry (by gross rent) of 3.3 years for the reporting quarter and that’s also a step down from the 3.7 years seen a year ago.

Low Chee Wah, the chief executive of Frasers Commercial Trust’s manager, had summed up the REIT’s reporting quarter with a few words in the earnings release:

“We are pleased to start the new financial year with a good set of results. The good performance of the Trust continues to be bolstered by Alexandra Technopark and the contribution from 357 Collins Street. 1QFY16 marks the first full quarter of contribution from 357 Collins Street following the completion of the acquisition on 18 August 2015. This yield accretive acquisition will boost the distributions of the Trust in the longer term.”

Low also added the following statements for the REIT’s outlook:

“In light of the weaker global economic outlook, the Manager will continue its proactive asset management and leasing activities to achieve healthy occupancies.

We are also pleased that the developments at China Square Central are on track. The Hotel and Commercial Project is a major milestone in the continuous rejuvenation which will boost the value of China Square Central in the long term. This will raise the profile of China Square Central and is in line with FCOT’s [Fraser’s Commercial Trust] objective of achieving long term growth in distributions and net asset value.”

Foolish summary

Frasers Commercial Trust closed at $1.20 yesterday. This translates to a historical price-to-book ratio of 0.78 and a distribution yield of around 8.1%.

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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.