Frasers Centrepoint Trust’s Latest Earnings: Wrapping up the Fiscal Year With A Higher Distribution

Frasers Centrepoint Trust  (SGX: J69U) released its full-year and fourth-quarter earnings for its fiscal year ended 30 September 2016 (FY2016) this morning.

As a quick background, the real estate investment trust (REIT) has ownership stakes in six sub-urban shopping malls located in Singapore. Causeway Point, Northpoint, and Changi City Point are part of the six and they collectively make up a significant portion of the REIT’s sales and income. Meanwhile, Frasers Centrepoint Trust also holds a 31.2% stake in Hektar Real Estate Investment Trust (H-REIT).

You can read more about Frasers Centrepoint Trust here, or catch up with the results from the REIT’s previous quarter here.

Financial highlights

The following’s a quick rundown on some of the REIT’s latest financial figures:

  1. Gross revenue fell to $44.6 million for the reporting quarter, down 6.0% from the same quarter a year ago. For FY2016, gross revenue came in at $183.8 million, 2.9% lower than in FY2015.
  2. For the fourth quarter, net property income (NPI) also fell by 0.9% year-on-year to $31.5 million. For the full fiscal year, NPI had dipped by 0.9% as well to $129.9 million.
  3. Share of associate results (operations), which covers Frasers Centrepoint Trust’s ownership in H-REIT, fell 35.5% from $1.1 million in the fourth fiscal quarter last year to $718,000 in the reporting quarter.
  4. Distribution per unit (DPU) for FY2016’s fourth-quarter was 2.815 cents, down 1.5% from the same quarter a year ago. For FY2016, DPU was 11.764 cents, up 1.3% from the previous fiscal year.
  5. The REIT’s property portfolio was valued at $2.51 billion on 30 September 2016. Frasers Centrepoint Trust reported a net asset value per unit of $1.93, a slight increase from the S$1.91 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 the REIT is funded, and its sensitivity to the interest rate environment. These are summarised for Frasers Centrepoint Trust below:

Source: Fraser Centrepoint Trust’s earnings presentation

As of 30 September 2016, the REIT’s weighted average debt to maturity was 2.7 years. The cost of borrowing was just 2.1% in the reporting quarter, an improvement from the 2.4% recorded on 30 September 2015. Meanwhile, Frasers Centrepoint Trust’s interest coverage ratio had improved alongside the lower financing cost.

Total borrowings, though, ticked up slightly. In the release of its results for the third-quarter of FY2016, Frasers Centrepoint Trust said that it expected the percentage of its total borrowings with fixed rates to fall under 60%. That did happen and the percentage of fixed interest rate debt is now 59%.

Frasers Centrepoint Trust has $218 million in borrowings – or 29.7% of its total debt – that needs to be refinanced in FY2017.

Operational highlights and a future outlook

Frasers Centrepoint Trust’s top-line fell mainly due to lower revenue from Northpoint and Changi City Point. The former is undergoing a two-phase asset enhancement initiative (AEI) which is expected to be completed by September 2017. The latter is having a changeover in an anchor tenant.

The REIT’s pverall portfolio occupancy is currently 89.4%. Northpoint recorded an occupancy rate of just 70.9% for the reporting quarter. Another laggard was Changi City Point, which had an occupancy rate of 81.1%.

As a whole, the REIT’s weighted average lease expiry (by gross rent) was 1.36 years. Overall shopper traffic in the fourth-quarter of FY2016 was up by 0.4% year-on-year.

Dr Chew Tuan Chiong, the chief executive of the REIT’s manager, shared the following statement to wrap up Frasers Centrepoint Trust’s year:

“FY2016 is a significant milestone for FCT as we celebrate its tenth year since its listing on the Singapore Exchange. Over the ten years, FCT has maintained steady growth, stable performance and delivered higher DPU every year at a compounded annual growth rate of almost 7%. The NAV per unit this year has also hit a new high at $1.93.

This track record is built upon the successful execution of our strategies, prudence in capital management, diligence of our people and support from our unitholders, amongst other success factors.”

Dr Chew also added a brief comment on the REIT’s outlook:

“Going forward, we will continue to focus on optimising the performance and returns of FCT’s malls, ensuring that they remain relevant to our shoppers and tenants. AEI and acquisition strategies will remain the key growth drivers for FCT, while active lease management and maintaining healthy occupancy and rental reversion are crucial in maintaining our organic growth momentum.”

Frasers Centrepoint Trust added that its “well-located suburban malls are expected to remain resilient” even though the retail sector in Singapore “continues to face headwinds and challenges ahead.”

Frasers Centrepoint Trust’s units opened at a price of $2.16 each today. This translates to a historical price-to-book ratio of 1.12 and a distribution yield of around 5.4%.

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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.