Frasers Centrepoint Trust’s Latest Earnings: Revenue Falls Slightly But…

Frasers Centrepoint Trust  (SGX: J69U) 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 sub-urban shopping malls located in Singapore. Causeway Point, Northpoint, and Changi Point are part of the six and they collectively make up a significant portion of the REIT’s sales and income. Frasers Centrepoint Trust also holds a 31.2% stake in the Malaysia-based Hektar Real Estate Investment Trust (H-REIT).

You can read more about the REIT in here, or catch up with its previous quarter’s earnings here.

Financial highlights

The following’s a quick rundown on Frasers Centrepoint Trust’s latest figures for the first-quarter of the financial year ending 30 September 2016 (FY2016):

  1. For the reporting quarter, gross revenue dipped slightly by 0.2% to $47.1 million.
  2. However, net property income (NPI) still rose by 2% year-on-year. For the reporting quarter, NPI came in at $33.5 million compared to $32.9 million for the same quarter a year ago.
  3. Share of associate results (operations), which covers the REIT’s ownership in H-REIT, fell 20.9% from $1.2 million in FY2015’s first quarter to $0.95 million in the reporting quarter.
  4. Distribution per unit (DPU) for the first quarter of FY2016 was 2.87 cents per unit, up 4.4% year-on-year.
  5. The property portfolio of the REIT was valued at $2.46 billion on 30 September 2015. Frasers Centrepoint Trust reported a net asset value per unit of $1.91 for the reporting quarter, up 3.2% from S$1.85 seen 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 summarized for Frasers Centrepoint Trust below:

2016-01-21 FCT Debt Table
Source: Frasers Centrepoint Trust’s earnings presentations

In general, the REIT’s debt profile has improved compared to a year ago.

Cost of borrowings was lower, interest coverage was higher, and the gearing level reduced as well. On the other hand, the REIT lost some coverage against interest rate changes with the drop in its percentage of borrowings on fixed interest rates. The REIT’s weighted average debt to maturity was relatively short as well at 1.45 years (as of 31 December 2015.)

Foolish investors might want to keep an eye on the refinancing activity of the REIT for the next two fiscal years. Over the period mentioned, more than 65% of its borrowings will become due.

Operational highlights

For the fiscal first-quarter, Bedok Point was the laggard of the group again. The mall’s occupancy fell to 76.8% (compared to 90.4% a year ago) mainly due to the fitting out activities of a major new tenant. The mall’s gross revenue and NPI had both suffered double digit falls as a result.

With Bedok Point’s lagging performance, Frasers Centrepoint Trust’s overall portfolio occupancy had dipped to 94.5% in the reporting quarter, compared to 96% in the prior quarter. The weighted average lease expiry (by gross rent) was 1.59 years.

On a brighter note, the overall shopper traffic in the REIT’s malls during the fiscal first-quarter flew up by 8% year-on-year. This was driven by the closure of an outdoor corridor adjacent to Northpoint. The same mall is also earmarked for an asset enhancement initiative (AEI). Northpoint is expected to undergo an 18-month AEI. Average mall occupancy for Northpoint is expected to decline to 76% from March to September 2016.

Dr Chew Tuan Chiong, Chief Executive Officer of the REIT’s manager, had the following comments and outlook for the future in the earnings release:

“We are pleased that FCT has delivered another good set of financial results with steady operating performance, despite the challenges in the retail sector. This is a good start for the new financial year. We will continue to focus on our priorities in active lease and tenant-mix management, asset enhancement works at Northpoint, capital management and exploring growth opportunities both in Singapore and overseas.”

Foolish summary

Frasers Centrepoint Trust closed at $1.84 yesterday. This translates to a historical price-to-book ratio of 0.96 and a trailing distribution yield of around 6.4%.

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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 owns units in Frasers Centrepoint Trust.