Frasers Centrepoint Trust’s Latest Earnings: What Investors Need to Know

This morning, Frasers Centrepoint Trust  (SGX: J69U) released its second-quarter earnings report for its fiscal year ending 30 September 2016 (FY2016). The reporting period is from 1 January 2016 to 31 March 2016.

Frasers Centrepoint Trust is a real estate investment trust (REIT) that has ownership stakes in six sub-urban shopping malls in Singapore. Causeway Point and Northpoint make up a significant portion of the REIT’s 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 results from the REIT’s previous quarter here.

Financial highlights

The following’s a rundown on the latest financial figures from Frasers Centrepoint Trust:

  1. Gross revenue fell to $47.1 million in the latest quarter, down 0.8% from the same quarter a year ago.
  2. Quarterly net property income (NPI) rose by 0.4% year-on-year. For the reporting quarter, NPI came in at $33.7 million, compared to $33.5 million for the same quarter a year ago. Frasers Centrepoint Trust benefited from lower property expenses here.
  3. Distribution per unit (DPU) for the second-quarter of FY2016 was 3.039 cents per unit, which was up 2.6% from the corresponding quarter last year.
  4. The REIT’s property portfolio was valued at $2.46 billion as at 31 December 2015. Fraser Centrepoint Trust ended the reporting quarter with a net asset value per unit of $1.91, up 2.7% from the $1.86 seen a year ago.

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

Frasers Centrepoint Trust balance sheet details
Source: Frasers Centrepoint Trust’s earnings presentation

As of 31 March 2016, the REIT’s weighted average debt to maturity was 1.91 years. With reference to the table above, the REIT’s cost of borrowing was 2.29% in the reporting quarter, an improvement from the 2.79% seen a year ago. The interest cover ratio had also improved alongside the lower financing cost and gearing ratio.

Investors might also want to watch out for Frasers Centrepoint Trust’s refinancing activity in FY2016 and FY2017. Over the period mentioned, almost 55% of the REIT’s borrowings will come due.

Operational highlights and a future outlook

Frasers Centrepoint Trust’s top-line fell mainly due to lower revenue from Northpoint. This was due to the asset enhancement initiative which began in March 2016 for the mall. The AEI will be carried out in two phases over an 18-month period.

Frasers Centrepoint Trust expects the mall’s average occupancy to fall to 76% between March 2016 and September 2016. The AEI is estimated to cost $60 million and will be funded by borrowings and internal resources. Dr. Chew Tuan Chiong, the chief executive of Frasers Centrepoint Trust’s manager, added his comments on the AEI:

“This AEI is part of our strategy to periodically upgrade our malls to provide sustainable income growth for FCT. Northpoint currently enjoys an average of about 4 million shopper visits per month and we believe that the upgraded mall and the integration with the upcoming Northpoint City will provide better shopping experience for our shoppers and drive better sales for our tenants.”

In the reporting quarter, the REIT’s overall portfolio occupancy stood at 92%. Of the six properties in the portfolio, Bedok Point continues to be the laggard of the group with a mall occupancy of just 86.1%. Due to the AEI, Northpoint recorded an occupancy rate of 81.7% for the reporting quarter. The REIT’s portfolio had a weighted average lease expiry (by gross rent) of 1.5 years.

Overall shopper traffic for the REIT’s malls in the reporting quarter had increased by 11.4% year-on-year, a positive sign that the malls are still popular.

In the earnings release, Dr. Chew had some comments on Frasers Centrepoint Trust’s outlook:

“FCT [Fraser Centrepoint Trust] has continued to deliver steady performance in 2Q16. Going forward, we will remain focused on growing the Trust on solid footing through organic growth, AEI and exploration of acquisition opportunities.

The Singapore retail environment continues to be challenging. The retail sales index, excluding motor vehicles, rose 1.4% year-on-year in January 2016 but fell 9.6% in February 2016. However, we believe suburban retail malls, particularly for the well-located ones, would stay resilient as it depends more on necessity shopping from recurring shopper traffic.”

Frasers Centrepoint Trust’s units opened trading at a price of $2.01 this morning. This translates to a historical price-to-book ratio of 1.05 and a trailing distribution yield of 5.9%.

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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.